On April 22, the China Iron and Steel Association (CISA) first quarter of 2020 information conference was held in Beijing in the form of video. He Wenbo, secretary of the Party Committee of China Iron and Steel Association, said at the meeting that the steel industry encountered four major difficulties and problems during the first quarter.
First, steel demand has declined and prices have continued to fall. In the first quarter, China's GDP dropped by 6.8% year-on-year, and all indicators of the major steel-using industries fell sharply year-on-year, and steel consumption declined. Among them, the new construction area of real estate fell by 27.2% year-on-year, investment in infrastructure construction (excluding electricity, heat, gas and water production and supply) fell by 19.7% year-on-year, automobile production fell by 45.2% year-on-year, and shipbuilding completions fell by 27.3% year-on-year. Demand has fallen, supply has remained stable, and the supply in the steel market has exceeded demand, resulting in a downward trend in steel prices. As of the second week of April, the China Steel Price Index (CSPI) fell to 96.86 points, the lowest point since May 2017, a cumulative decrease of 8.71% from the beginning of this year.
The second is the spread of the international epidemic and pressure on exports. In the first quarter, China's steel export volume fell by 16.0% year-on-year, while in 2019 it fell by 7.3%, and the decline was further expanded. Since March, the international epidemic has continued to spread, overseas steel demand has plummeted, and export orders for steel products have been difficult. At the same time, exports of machinery, automobiles, home appliances, shipbuilding and other industries have declined, and indirect exports of steel have also been hit hard.
The third is that the inventory continues to be high, which affects the stable operation of the future market. This year, the peak of steel stocks increased significantly. Although inventories began to decline from mid-March, as of the end of March, steel mill inventories and social inventories were 18.07 million tons and 19.06 million tons, respectively, still higher than the same period in previous years. Inventory continues to be high, affecting the stable operation of the outlook. If the production level of an enterprise exceeds demand, the process of destocking will be very difficult, and high inventory may become the norm in the steel market this year. At the same time, high inventory takes up a lot of funds, affecting the company's capital turnover.
Fourth, the trend of mining price and steel price diverged, making it more difficult to reduce costs and increase efficiency. According to data from the General Administration of Customs, in the first quarter, China imported 260 million tons of iron ore (604, -2.50, -0.41%), an increase of 1.3% year-on-year; the average import price was US $ 90.59 / ton, an increase of 11.7% year-on-year. During the same period, steel prices fell by 5.7% year-on-year. The divergence of the imported iron ore price trend and the steel price trend has brought greater pressure on steel companies to reduce costs and increase efficiency.
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