From the recent macro data to see the changes in steel market demand

Recently, with the accelerated decline in the steel market price, the pessimism in the market has continued to increase. In view of this situation, based on several macroeconomic data released in June, this paper selected some important economic indicators and data on the production and demand changes of the downstream steel industry to conduct a brief analysis to aggregate macroeconomic operations and downstream demand changes to help The market predicts changes in the supply and demand of steel products in the third quarter.

A brief analysis of the downstream industry

Downstream of the iron and steel industry are real estate, infrastructure, automobiles, shipbuilding, home appliances, and machinery. The largest proportion of real estate is the most important downstream industry. At present, in the real estate market, the government has put forward strict regulation during the government's work report at the beginning of the year. At present, there has been no change in regulation and control objectives. The growth rate of real estate investment and the growth of land purchase area continued to decline steadily in June, and the rate of decline was relatively flat. It is expected that it will continue to show a slight downward trend in July. The growth in the sales area of ​​commercial housing has rebounded due to the need for just pulling. With the growth of rigid demand, long-term regulation and control will drive social and reasonable demand to balance.

As regards the construction of affordable housing, according to the data released by the Ministry of Housing and Urban-Rural Development, a total of 4.7 million sets of affordable housing projects for urban residents have been built as of January-June, and 2.6 million sets have basically been built. According to the completion situation in the second quarter, the basic monthly increase of about 500,000 sets. In the second half of the year, it is necessary to ensure that all 5 million sets of affordable housing construction targets are completed. Among them, due to the elimination of natural climatic factors in December, the cold regions in the north are excluded from November and December. In the second half of the year between July and November, at least 500,000 units will be started each month. With the steady growth and ensuring that the favorable investment policies for achieving the annual economic growth rate are gradually introduced, the investment in the construction of affordable housing is expected to accelerate in the third quarter.

Figure 1: Changes in real estate investment in recent years in China

Figure 2: The completion of construction of affordable housing in 2012

In terms of fixed asset investment, it continued to rebound steadily in June. According to the investment situation in previous years, even after the peak in June, the investment in fixed assets remained high in the third quarter. Investment in fixed assets in railways, highways, and ports showed a steady increase month by month, which was in line with the results of the June forecast.

Figure 3: China's investment in fixed assets in recent years

Figure 4: Railway Investment in China in Recent Years

Figure 5: Highway Investment in China in Recent Years

Second, the major downstream demand industries, such as automobiles, shipbuilding, home appliances and machinery, have shown slight and steady growth in the short term. Among them, car sales continued to remain relatively high, although the year-on-year growth rate slowed down, but compared to last year's high sales base in June, despite the introduction of unfavorable restrictions in some cities, car sales remained at a high level. Shipbuilding industry's new orders declined year-on-year, affecting long-term shipbuilding growth, but hand-held orders increased year-on-year, indicating that the shipbuilding completion volume will steadily increase slightly in the short term. The machinery industry has been in a negative year-on-year growth since May last year. Except for the significant year-on-year increase in the base year of December, the negative growth of the machinery industry has further narrowed since May of this year, showing a slow recovery and gradually stabilizing.

Second, macro indicators

In June, China’s official PMI continued to fall, hitting a seven-month low. Analyze the correlation between PMI indicators and MYSPIC comprehensive index: PMI indicators have a certain leading position, and the Myspic index will enter the downtrend channel because the lag will continue to increase after a certain period of time after the PMI enters the decline space. Translating the MYSPIC Composite Index to the left for one month yields a correlation of the two. We can think that the PMI indicator is earlier than the steel price index for one month, that is, one month after the PMI rebounded, the MYSPIC index continued to rise. It is expected that the official PMI value will be better in July than in June, and the PMI in the third quarter will slow down and stabilize.

Secondly, judging from the changes in the power consumption of heavy industries, after a negative growth rate in May, it has returned to positive growth in June, and it is now forming a stable pattern at the bottom, and is expected to gradually recover in the third quarter. In terms of industrial added value, in general, if the annual GDP growth rate should maintain a growth rate of around 8%, the industrial added value should remain within the range of 11%. We can see that the GDP growth rate in the first quarter was 8.1%, the industrial added value in the first three months of the first quarter was maintained at about 11%, and the second quarter GDP growth rate was 7.6%, the lowest level in three years, and it is expected that the second quarter will become GDP. The low growth rate will stabilize and recover in the third quarter.

Third, the conclusion

Through the above analysis, we have seen that at present, under the government's proactive macro-control, China's entire macro economy is in the process of “declining economic growth and slowing down and gradually stabilizing and stabilizing”. For the downstream demand industries of the steel industry, the industry is also experiencing a slowdown in growth rate or a slow rebound in the bottom due to the impact of macroeconomic regulation. At present, the global economy is in a slump, and in some countries in Europe, economic recession has occurred, and external demand has been suppressed. China's economic growth mode is in a period of gradual adjustment. Despite the severe economic environment, the current economic slowdown is improving. HSBC's July preview of China's manufacturing PMI rose to 49.5, a 5-month high, and can be seen as a strong testimony of the Chinese economy's bottoming up. The strong commodity property of steel products determines that the impact of demand changes during the economic slowdown is obvious and has rapid conductivity. With the sharp fall in prices, the steel prices have shown signs of stabilizing in the short term. With the economy decelerating and stabilizing, it is expected that the supply and demand of the steel market will also be rebalanced with the slow recovery of macroeconomic data, and steel prices will also have a tendency to stabilize and rebound.