Author: Wu Mianqiang

Xing Weiwei, who has been in the steel industry for more than 20 years, said that he has felt "so tired" recently, and the domestic steel market value continues to decline, which makes him a little anxious.

Xing Weiwei is a partner of Shanghai Bangkun Industrial Co., Ltd., which specializes in rebar and small hardware series steel, and distributes steel for comprehensive engineering project sites. He said that in previous years, the company's annual sales of steel reached more than 5,2 tons, and sales reached more than <> million yuan, but this year's situation made him not optimistic, "According to the order situation since the first quarter of this year, our sales have fallen sharply." ”

Boss Pan, the head of another steel trading enterprise, also felt the impact of the market downturn, and although his company did not show a large business decline, its orders did not rise.

Data from the industry and government departments show that since the first quarter of this year, domestic steel prices have continued to fall, and the situation of sluggish demand and overcapacity is more obvious.

"In previous years, May and June were the peak season for steel sales, but now the peak season is not booming." Boss Pan said.

The volume and price are low

Guangdong's Lecong Steel World, the world's well-known steel trade distribution center, the Pearl River Delta and even South China tens of thousands of factories more than 80% of industrial steel purchased from here, rebar, plate, stainless steel, steel pipe... Almost all steel grades needed for industrial production are available here.

A number of steel traders from Lecong Steel World introduced in an interview that since the beginning of this year, steel prices have continued to fall, and sales are also declining.

Boss Chen has been operating medium and heavy plate steel in Lecong Steel World for many years, and he is a major seller in this segment of the steel market in Guangdong. In the past, Boss Chen shipped 3,30 tons a month, "with an annual shipment of 40,<> to <>,<> tons and sales of hundreds of millions of yuan", mainly supplied to enterprises in the three major industries of infrastructure, abrasives and steel structure. But after the Spring Festival this year, Boss Chen felt the downward trend of the market, which has continued until now.

"After the New Year, the company mainly made up some orders for customers, but the orders did not last, there are not too many handheld orders at present, and the recent shipments are also very average, and there is almost no business." Boss Chen was very anxious, "What should I do if the sales decline later?" Our financial pressure is very high, and the mentality of our peers is actually not very good. ”

It is not only the bosses who feel "difficult" from the world of steel.

"(Funds) are under pressure, and (markets) are not easy to do." On May 5, Boss Wu, a construction contractor who operates rebar in Wuhan, sighed to the first financial reporter. The construction boss who contracted projects in Hubei Province has been engaged in the infrastructure industry in central China for more than 15 years, on the one hand, the company has construction qualifications to undertake construction engineering business, on the other hand, it has the business of selling steel, and consumes 20,<> tons of rebar per year.

Rebar (commonly known as "steel bar") is a very common steel used in the infrastructure industry, according to industry insiders, the amount of steel used in infrastructure projects accounts for more than 95% of the amount of steel used in infrastructure projects. Since mid-March this year, rebar futures prices have fallen nearly 3% from 3,4328 yuan per ton in mid-March to 5,13 yuan per ton on May 3670.

On May 5, according to the "Market Price Changes of Important Means of Production in the Circulation Field in Early May 14" released by the National Bureau of Statistics, the prices of six major steel grades of ferrous metal plate rebar (Φ2023mm, HRB5E), wire rod (Φ20-400mm, HPB8), ordinary medium plate (10mm, Q300), hot-rolled ordinary coil (20.235-4.75mm, Q11), seamless steel pipe (5*235, 219#) and angle steel (6#) all fell. Among them, the price of rebar (Φ20mm, HRB5E) in the current period (May 20-400) reached 5.1 yuan / ton, down 10.3723 yuan, or 5.4%, from the previous period (April 20-30); The price of wire rod (Φ70-6mm, HPB1) fell 9 yuan to 8.10 yuan / ton, down 300.74%.

"The market is not very good right now. It is more tiring to do, the amount of capital occupied by the purchase of steel is large, the risk coefficient is relatively high, and the return is relatively small. Xing Weiwei, who is also worried about the market, said that now steel prices continue to fall, and profits have been eroded severely.

Xing Weiwei introduced that traditional steel trading enterprises are in the sales end of the advance mode, that is, customers at downstream engineering project sites basically pay for goods in two or three months, so his advance capital demand is large.

Sales and prices both fell, while production showed overcapacity and excessive output.

On May 5, according to the main data of industrial production above designated size in April 16 released by the National Bureau of Statistics, from January to April, crude steel production was 2023.4 million tons, a year-on-year increase of 1.4%; Steel production reached 35439.4 million tons, a year-on-year increase of 1.44636%.

On April 4, the China Iron and Steel Association (hereinafter referred to as "China Iron and Steel Association") held an information conference for the first quarter of 26 in Beijing. The association quoted data released by the National Bureau of Statistics as saying that in the first quarter, China's crude steel output was 2023.26156 million tons, a year-on-year increase of 6.1%; pig iron output was 21983.7 million tons, a year-on-year increase of 6.33259%; Steel output was 5.8 million tons, a year-on-year increase of 24342.1%, "In the first quarter, the apparent consumption of crude steel was 9.<> million tons, a year-on-year increase of <>.<>%; The monthly steel inventory of key enterprises is higher than the same period last year, and the supply intensity is higher than the consumption growth. ”

In March alone, average daily crude steel production reached a high level. According to the China Iron and Steel Association, in March this year, China's pig iron, crude steel and steel output were 3.3 million tons, 7807.9573 million tons and 12725.7 million tons, respectively, an increase of 3.6%, 9.8% and 1.309% year-on-year; The average daily output of crude steel was <>.<> million tons/day, the highest level in the same period of the previous year.

Oversupply directly leads to an increase in inventories.

Recently, the first financial reporter learned from a large state-owned steel company in East China that their "warehouse inventory of steel products has increased a lot." "The warehouse in the factory is divided into two products, one is "futures" that have been placed for delivery due to date, and the other is "spot" that has not yet identified buyers.

In this regard, steel mills are also helpless. "The proportion of 'spot' in warehouses has increased significantly, which is actually bad for steel mills. Because it is placed in the warehouse, the storage cost needs to be increased. Money flows only when goods flow. But at the moment this is also the status quo, there is no way. ”

Sluggish downstream demand

In the view of many interviewed steel industry insiders, the reason for the current sluggish steel market sales and prices is mainly due to the insufficient operating rate of engineering projects, resulting in sluggish market demand.

"Since the first quarter of this year, the project start rate has not been high, and compared with the same period last year, the site start rate has fallen by 60% to 70%, resulting in a serious decline in steel demand." Boss Wu, who has the dual identity of builder and steel trader, said that since the beginning of the year, the company's construction site has used less than 2000,30 tons of rebar, down 40% to <>% from last year, "Now is the peak season for construction production, the annual steel sales mainly look at this time, but now this market is far less than in previous years, and it is expected that the annual steel consumption will also decline." ”

"The downstream of the steel industry is mainly construction and manufacturing, and the two are related." Sun Lei, chief researcher of Hantang Capital, who has long conducted research on macroeconomics and key industries, told First Financial Reporter, "Generally, we think it takes about 6 months from the real estate developer to the start of new construction, but this time transmission chain may be relatively long this year, because the operating rate of large real estate enterprises is not high so far after the year." ”

On May 5, the National Bureau of Statistics released the "Basic Situation of the National Real Estate Market from January to April 16", showing that from January to April, the housing construction area of real estate development enterprises was 2023 million square meters, down 1.4% year-on-year. Among them, the residential construction area was 1 million square meters, down 4.771271%, and the new housing construction area was 5.6 million square meters, down 542968.5%. Among them, the new residential construction area was 9 million square meters, down 31220.21%. ”

The "Funds in Place for Real Estate Development Enterprises" shows that from January to April 2023, the funds in place for real estate development enterprises will be 1.4 trillion yuan, down 4.52% year-on-year. Among them, domestic loans were 6.4 billion yuan, down 6144%; utilised foreign capital amounted to RMB10.12 billion, down by 69.6%; Self-financing amounted to RMB12965,19.4 billion, down by <>.<>%.

"The new construction stage is the stage where the demand for steel is most concentrated, such as building beams and columns, building civil air defense projects, etc., all need to use a lot of steel." Boss Wu told the first financial reporter that the current dilemma is still caused by the low rate of new construction sites, "Generally, new construction projects need to advance a large amount of funds, and now we do not have enough money, and we can only slowly drag (the project) without money, and then put into the new construction site after the construction site has completed a batch of new payments." ”

Under the decline in demand, steel companies are also trying to control production, but it is impossible to shut down.

"We are now limiting production every day, and we have reduced production by 20,<> tons in the first quarter of this year, and the reduction ratio is still quite large." Guo Huai (pseudonym), who works on the production line of a large steel enterprise in East China, said. His workshop produces steel products suitable for containers, home appliances, shipbuilding and new energy infrastructure.

"The current situation is not very good, and production is under a lot of pressure." Guo Huai said that the main reason is that the price of raw materials and fuel required for production has not fallen as much as the price of steel, and the main cost of production remains high.

According to the monitoring of the China Iron and Steel Association, since the beginning of this year, although steel prices have rebounded month by month, CSPI at the end of March was 3.118 points, up 54.2% from the end of last year, but the price of imported iron ore in the same period also showed a monthly upward trend, reaching 88.3 US dollars / ton in March, up 117.70% from the end of last year.

"Steel prices have fallen sharply, and raw fuel prices remain relatively high. Recently, the price of steel in the domestic market has continued to decline rapidly, although the price of raw fuel has also declined, but it is still at a relatively high level, and the production and operation of steel enterprises are facing severe challenges. At the first quarter meeting held by the China Steel Association on April 4, talking about the "difficulties and challenges faced by the steel industry", relevant people of the China Steel Association said.

The price of raw materials and fuel required for production has not fallen as much as the price of steel, but the main cost of production remains high. "Steel plants are different from other manufacturing companies in that production involves machinery and fuel." Guo Huai said that once production is suspended, it will face a very large loss of funds. "First, boilers and steelmaking equipment need to consume a lot of coal and other fuels to heat up, and at the same time, it takes several days to meet the temperature requirements of steelmaking; Second, after the shutdown, it also takes a few days for the steelmaking equipment to cool, and at the same time, it is necessary to maintain and maintain the equipment", and the company must pay employees as usual.

Adjust, live

Under the market downturn, steel traders are also looking for ways to survive.

Boss Pan is the "second generation of steel trade", his parents have worked in the field of steel trade for more than 30 years, they have "crossed many cycles of the industry", not only experienced the domestic real estate industry and infrastructure construction from 2008 to 2013, but also experienced the decline in the industry's de-capacity prices around 2016.

Mr. Pan said that private enterprises accounted for 70 percent of the company's sales among the company's early customers, and the remaining 30 percent of its business was supplied to state-owned enterprises. In 2021, after the liquidity crisis of some large domestic real estate enterprises, the company is more inclined to supply steel to the engineering projects of state-owned enterprises. The projects of central enterprises and state-owned enterprises are still seriously involved, and many similar enterprises are "sharpening their heads" to squeeze into this field, for which the company has to participate in low-profit centralized procurement projects.

"The centralized procurement project is mainly arranged at the level of the engineering enterprise group, and the payment collection is more guaranteed. However, the profit margin is very small, the profit margin can be 5%, the competition is fierce, and the price is very transparent. Boss Pan said.

Boss Wu of Wuhan also said, "We are now focusing on expanding some projects in the field of state-owned enterprises, central enterprises and people's livelihood. After all, the owner of such a project is clear, and the later project payment is more guaranteed. ”

"We are still seeking stability and not developing new customers." Boss Pan said that the company's principle in customer selection is "cooked not raw", will not blindly pursue the increase in trade volume, in many cases, the account period and cross-cycle will drag on for a long time, resulting in a lot of pressure on the capital chain, try to be stable and familiar customers, do not blindly expand.

In the past, in the warehouse of Boss Pan's company, tens of thousands of tons of steel were hoarded at peak times, and two or three thousand tons at troughs, with an average of five or six thousand tons as reserves. If there is a demand for one or two thousand tons of goods on the construction site, we will immediately find an upstream order, and after the cash purchase is completed, we will directly distribute it to the construction site. ”

Xing Weiwei is also a "supply on demand" approach to deal with the current dilemma. "We all order in weekly units, and report the next week's purchase order or plan every Thursday or Friday, and start unified delivery next week. It is basically delivered on demand, and I dare not hoard too many goods. ”

According to the steel social inventory monitoring report released by the China Steel Association in early May 2023, rebar stocks are declining recently. In early May, rebar stocks were 5.5 million tons, down 550,28 tons, down 4.8%, and inventories continued to decline; However, rebar stocks increased by 242.78 million tons from the beginning of the year, an increase of 6.96%; It was 14,9 tons less than the same period last year, down <>.<>%.

Relevant people from the China Steel Association said that the majority of steel enterprises should jointly strengthen self-discipline, pay close attention to the total demand and structural changes of the downstream steel-using industry, rationally grasp the production rhythm, and reasonably control the steel inventory of enterprises; We should jointly adhere to the business principle of "three determinations and three nots", that is, "determine production by sales", and do not turn cash into inventory; "Produce with efficiency", do not produce operational "blood loss"; Do not turn cash into receivables, and jointly maintain the smooth operation of the steel market.