Steel pipe opportunity

Over the whole year, the domestic epidemic prevention and control has been normalized, and the Chinese economy has maintained a good recovery trend, with strong external demand but weak endogenous driving force. In particular, the rapid decline of the construction industry GDP (22.8% year-on-year in the first quarter, 1.8% in the second quarter and -1.8% in the third quarter) has greatly dragged down the overall economic trend, and the economic growth rate of the whole year has been high at first and then low. The Central Economic Work Conference in early December judged the economic situation as follows: China’s economic development faces three pressures of demand contraction of welded steel pipe, supply shock, weak forecast. For next year’s economic work, we stressed the need to “ensure stability and seek progress while maintaining stability”.

The downstream demand for hot rolled steel pipe is mainly concentrated in construction, construction machinery, automobile appliances and other fields (among which construction steel accounts for more than 60%). As a basic industry of the national economy, steel consumption is closely related to economic growth and fixed asset investment. After the epidemic last year, thanks to counter-cyclical policies and regulation, China’s economy was the first to achieve a V-shaped reversal and is on the track of stable recovery. However, since the beginning of this year, with the withdrawal of the marginal tightening of counter-cyclical easing policies and repeated disasters caused by extreme weather and imported epidemics in the middle of the year, the momentum of economic growth of round steel pipe has slowed down. In the third quarter, GDP growth was only 4.9% year-on-year and 0.2% quarter-on-quarter, the lowest in nearly a decade.

Dragged down by the economic downturn, the real estate growth rate slowed down after the high growth last year. The high sales collection in the first half of the year maintained the capital turnover of real estate enterprises, but the housing sales turned bad in the second half of the year, dragging down the annual investment growth. The growth rate of infrastructure investment is slow, the issuance of special bonds in the first three quarters is slow, and the lack of projects of China hollow section and funds leads to low steel strength for infrastructure construction. Throughout the year, apparent steel consumption fell sharply. According to our calculated data, the annual apparent consumption of crude steel in 2021 will be 1.012 billion tons, a year-on-year decrease of 34.49 million tons, or 3.29%. The demand will fall off a cliff, and the consumption growth rate will turn negative again after 2015.