Pipe market pattern

Against the backdrop of “housing is for living, not for speculative investment,” although the “stable growth” tone has relaxed real estate regulation, it is expected that the strict restrictions on property purchases and down payment ratios will not be significantly loosened. The year-on-year growth rate of real estate development investment may remain negative, resulting in a negative growth of newly started construction areas compared to the previous year. Considering the relaxation of real estate regulation under the “stable growth” policy and the positive impact of new affordable rental housing, we assume that the decline in newly started construction areas in 2023 may narrow compared to 2022, with a neutral hypothesis of around -8%. In addition, assuming that the year-on-year decrease in construction areas in 2023 is 2%, based on the proportion of steel used in the two, it is estimated that the impact of the two on steel demand of welded steel pipe in the real estate industry is about -4.5%.

Infrastructure investment growth is expected to accelerate, driving steel demand growth. Since the second half of 2022, to achieve stable macroeconomic growth, relevant departments have repeatedly proposed to accelerate the issuance and use of special bonds. In order to further strengthen guidance and push for the issuance of quotas to form actual workloads as soon as possible, the quotas of spiral welded pipes are required to be tilted towards provinces and cities with more central and provincial key projects.

With the concentration of new special bond issuances, China’s cumulative year-on-year growth rate of infrastructure investment turned positive in December. In January 2022, China issued a total of 484.4 billion yuan in new special bonds, with more than 70% of them invested in infrastructure. In terms of monetary policy, the People’s Bank of China has decided to reduce the reserve requirement ratio for financial institutions by 0.5 percentage points on December 15, 2021; in January 2022, the LPR one-year and five-year interest rates of zinc coated steel pipe were reduced by 10 basis points and 5 basis points, respectively. Under loose monetary policy, the growth rate of infrastructure investment may be further guaranteed.

From the perspective of the source of funds for infrastructure construction investment, self-raised funds have the largest proportion, among which the proportion of special bonds used for infrastructure investment is gradually increasing. Under the “stable growth” tone, the pace of special bond issuance has accelerated significantly since the end of last year. We assume that the growth rate of self-raised funds in 2023 is 10%, and the growth rate of other sources of funds is about 5%, so the overall growth rate of infrastructure investment funds in the whole year is expected to be about 8%. Correspondingly, we assume that the growth rate of carbon steel pipe for infrastructure construction is equivalent to the level of infrastructure investment funds, about 8%.