Beware of supply structural reform gains of steel pipe

The steel industry is building new capacity too quickly and the rapid growth in output of mild steel tube China is offsetting the gains of supply-side structural reform. The industry should attach great importance to this. Zheng yuchun, deputy director of the metallurgical industry economic development research center, told representatives of production and trade enterprises at the 2019 guangzhou ferrous metal industry chain and summit forum on the afternoon of Nov. 7. Zheng yuchun further pointed out that the excessive growth of output makes the relationship between supply and demand of the steel market change, the rise in the cost caused by the rise in the price of raw materials can not be effectively transmitted to the downstream industry, the benefit of steel enterprises will be greatly affected.

However, even if the industry’s supply and demand situation is not very optimistic, years of supply-side reform have bought steelmakers time to optimize themselves. Wang lijia, analyst at industrial securities, said, steel pipe suppliers should still have confidence. After all, steel enterprises in capacity utilization, balance sheet levels, and other aspects, have significantly improved. According to wang lijia, the steel market in 2020 will be “organic in crisis”. According to the data, in the first three quarters of this year, China’s crude steel output reached 747.82 million tons, up 8.4% year on year and 2.3 percentage points year on year. Steel output was 909.31 million tons, up 10.6% or 3.4 percentage points. Output of structural steel pipe was 354.36 million tons, up 6.3 percent from a 2.3 percent decline in the same period last year. The output of production pipe was 25.65 million tons, up 11.5% or 8.5 percentage points. Wang lijia analysis pointed out that since this year the supply side entered a new level. The reasons include adding scrap steel, improving the grade of iron ore into the furnace, optimizing the process technology and so on. In addition, the continuous production and resumption of short-process steelmaking capacity also led to the further release of crude steel output.

China’s fixed-asset investment (excluding rural households) grew by 5.4% year-on-year in the first nine months of this year, 0.1 percentage point lower than in the first eight months of this year, according to the analysis. Among the three investment sub-sectors, except for infrastructure investment, which picked up slightly, manufacturing investment of mild steel tube grew 2.5 per cent, 0.1 percentage point lower than in January-August, and real estate investment grew 10.5 per cent, unchanged from January-August.