The steel market economy has improved

On the 9th, the National Bureau of Statistics released the main macroeconomic data for November. The year-on-year growth rate of CPI returned to 2% again. Various indicators such as industrial added value, consumption, and investment continued their upward trend, and the domestic macro economy showed a favorable trend. .

In November, the added value of industries above designated size in China increased by 10.1% year-on-year, and the growth rate increased by 0.5% from October; the apparent rebound in the value added of heavy industry was the main reason for the good industrial value added in November. In November, the value added of domestic heavy industry increased by 10.5% year-on-year, 0.8 percentage point higher than that in October; the value-added of light industry increased by 9.2% year-on-year, only 0.1 percentage point higher than the growth rate in October, and the ratio of the growth of value added of heavy industry and light industry from October. The 1.07 increase to 1.14, rapid increase in the value of heavy industry reflects the effect of the country's steady growth of investment policies in the early stages is gradually apparent. As the growth rate of industrial added value has a good correlation with GDP, the stabilization and recovery of the economy in the fourth quarter will be a high probability event.

From the industry perspective, the ferrous metal smelting and rolling industry, chemical raw materials and chemical products in the upper and middle reaches continued to rebound; the growth rate of the downstream textile industry declined, and the growth rate of the automobile manufacturing industry rebounded, mainly due to the discontinued production in the early stage. Some Japanese car manufacturers resumed production. As the sales of domestic durable consumer goods have rebounded, the recovery of the PMI inventory of finished products and raw materials inventory indicates that the demand for restocking of enterprises has also increased, and the recovery of the growth rate of industrial added value will continue in the short term. However, the main driving force behind the current economic recovery is still government investment. The improvement in terminal demand is still not obvious, and the overcapacity situation is still the main factor constraining the rise in industrial product prices. Therefore, the sustainability of the rebound in industrial production growth. Still to be seen.

From the perspective of the steel industry, due to the fall in raw material prices from July to September, the profitability of the entire industry has improved after the fourth quarter, and the growth rate of the industry's added value has also steadily rebounded. In November, the industrial added value of ferrous metal smelting and rolling industry increased by 13.8% year-on-year, and the growth rate increased by 1.2 percentage points from October, which was the third consecutive month of recovery. However, due to the traditional off-season demand for steel products in the winter, and the current supply and demand contradictions in the steel industry are still not substantially improved, the entire steel industry may maintain a weak operating trend in the fourth quarter, and the industry’s economy may be significantly improved or wait until next spring. .

In November, China’s CPI increased by 2% year-on-year, and the growth rate increased by 0.3% from October; the significant increase in food prices, especially the price of fresh vegetables, and the narrowing of pork price decline were the main reasons for the rebound in the November CPI growth rate. In November, CPI’s food price rose by 3% year-on-year, and its growth rate increased by 1.2% compared with October. The price of fresh vegetables rose by 11.3% year-on-year (up by 1.1% in October), and the pork price decreased by 11.5% year-on-year (by 15.8% in October). Non-food prices rose by 1.6% year-on-year, 0.1 percentage points lower than in October. According to recent data from the Ministry of Commerce and the Ministry of Agriculture, the current positive growth rate of vegetable prices is still continuing, and the increase further expands. The pork price also starts to stabilize and pick up. The arrival of New Year's Day and the Spring Festival in the later period is expected to be 2-4 in the future. It is more likely that the CPI growth rate will rebound slightly during the month.

In November, China’s PPI fell by 2.2% year-on-year, which was a 0.6% increase from October; it was down slightly by 0.1% from the previous quarter.

The downside of the price of production materials was the main reason for the month-on-month decline in PPI growth in November. After the mid-September, the CRB index, the leading indicator of PPI, began to pull back, together with the two downward adjustments of domestic refined oil prices, which led to the declining of domestic production data, which in turn led to the fall of the PPI growth rate in November. However, given that the current economy has entered a slow recovery channel, with the gradual recovery of downstream demand, the growth rate of PPI may gradually recover. It is expected that the year-on-year growth rate of the second quarter of next year will increase from negative to positive.

The rebound in the year-on-year growth rate of PPI is conducive to the improvement of destocking and profitability of industrial enterprises, which will be conducive to the recovery of steel demand. However, due to the impact of cold weather in the north on the start of construction, it is expected that the growth in demand of various industries will not be significantly improved. Under such circumstances, steel prices may continue to operate weakly in the fourth quarter. Significant improvement in downstream demand for steel may have to wait until the spring of next year.

From January to November, the total investment in domestic fixed assets was 326.236 billion yuan, a year-on-year increase of 20.7%, and the growth rate was unchanged from January to October. However, the structure of investment has changed significantly. From January to November, domestic real estate investment increased by 16.7% year-on-year, and the growth rate rose by 1.3 percentage points from January to October. The month-on-month growth in November was 28.5%, which was a 13% increase from October. The growth rate of infrastructure investment apparently declined. From January to November, domestic infrastructure investment increased by 13.95% year-on-year, 0.2 percentage points lower than that in January-October, and it increased by 12.4% in November, a sharp drop of 13% from October.

As the current infrastructure investment policy has not turned to a turning trend, and the fixed-asset investment funds have been in place in the past few months, the increase in national budget funds and domestic spending has largely offset the impact of self-financing and the decline in the use of foreign capital. We believe that the decline in infrastructure investment in November is a temporary volatility, and the growth of domestic infrastructure investment in the latter period will continue to maintain a steady growth. In fact, we can see from the data on the leading indicators of investment in fixed assets such as newly-started project investment that the future investment demand is still sustainable; the total planned investment for new projects started in January-November increased 28.8% year-on-year, and the growth rate is lower than 1- It rose by 2.2 percentage points in October, and the figure has continued to exceed the growth in fixed asset investment since February of this year.

From the above, we can see that with the continuous recovery of consumption and investment and the increase in the country’s steady growth policy, the domestic macroeconomic situation will continue to improve from the fourth quarter of this year to the first half of next year. In the steel market, it is currently in the off-season demand season, and at the end of the quarter, the funding side continues to be tight. Due to financial pressure, the willingness of traders for winter storage is generally not strong, and the operating rate of steel mills remains high, and the contradiction between supply and demand remains. The lack of real relief; coupled with the recent increase in the anti-corruption efforts of the central government, has caused the delay of some large-scale projects to a certain extent, which will have a certain impact on short-term steel demand. Therefore, the steel market will continue to experience weak shocks in the short term, and it will actually improve or Wait until after the spring of next year.