The "darkest hour" of the steel market has passed

A sudden outbreak of covid-19 caused the "steel demand" to shrink abruptly after the Spring Festival this year.It can be said that the steel market after the Spring Festival this year suffered a "dark moment".

With the recent improvement in demand, steel social inventory has been down for two consecutive weeks.Statistics from industry institutions show that as of March 27, steel stocks in 29 key cities in China had reached 21.518 million tons, with a decrease of 935,000 tons or 4.16%.In the last two weeks, the accumulative stock of steel products has dropped by 1.609 million tons, or 7%.

Industry insiders said that although the current inventory has started a downward channel, but the current social inventory is still 52.7 percent higher than the same period last year.In addition, China iron and steel association statistics show that in the middle of march, the steel inventory of key steel enterprises reached 19.824 million tons, 10 million tons of month-on-month reduction of 1.5847 million tons, down 7.4%.With the resumption of production around the rate of improvement, the market turnover recovery, but the current inventory pressure still exists.What is certain, however, is that the "darkest moment" of the domestic steel market has passed.

Both the old and new infrastructure sectors are working together to boost demand for steel

At present, the situation of epidemic prevention and control in China has improved. The number of confirmed COVID 19 cases in most provinces has been "cleared".The author expects that after entering the second quarter, with the gradual lifting of relevant restrictions, consumption and investment activities may quickly rebound, domestic steel demand will increase significantly, inventory pressure will be significantly reduced.

Not only that, the outbreak shock also strengthened the counter-cyclical adjustment, resulting in new impetus for infrastructure investment.I understand that this year alone, the "new infrastructure" investment will reach a trillion yuan.Both the old and new infrastructures will work together. It is expected that the growth rate of national infrastructure investment will increase significantly this year, or reach more than 6%, which is conducive to boosting steel demand and digesting inventories.

Data from the ministry of finance shows that as of March 20, China had issued 1023.3 billion yuan in special bonds, all of which were used for the construction of transportation facilities such as railway and rail transit, as well as major infrastructure projects in areas such as ecological protection, agriculture, forestry, water conservancy, municipal administration and industrial parks.It can be seen that financial support is also increasing.In addition, based on the need to strengthen counter-cyclical adjustment and maintain steady economic growth, monetary policy will be further relaxed. While making a comprehensive and targeted cut in the reserve requirement ratio, the possibility of a comprehensive interest rate cut is not ruled out.

Foreign epidemic spread spread of steel exports are awaiting the opportunity

The spread of covid-19 in foreign countries, sudden changes in international oil prices, and increasing credit pressures in developed and emerging markets have had a major impact on the global economy.

The institute of international finance (iif) recently reported that the global economy will contract by 1.5% this year, with the us economy contracting by 2.8%, the eurozone by 4.7% and Japan by 2.6%.It is the third time in three months that the agency has cut its forecast for global growth, underscoring the deteriorating state of the global economy.In addition, international monetary fund managing director georgieva also issued a statement that the global economy will fall into negative growth in 2020, at least as deep as the recession in 2008 financial crisis, or worse.

Under this pressure, the federal reserve "amplification", unprecedented unlimited QE (quantitative easing policy).On March 23rd the federal reserve announced broad new measures to support the economy, continuing to buy treasuries and mortgage-backed securities to support the smooth functioning of the market.At the same time, the federal reserve also announced that it will expand the scale of liquidity facilities in the money market.This is the most aggressive market intervention by the federal reserve so far since the outbreak of COVID 19 in the United States.There will also be a $2 trillion fiscal stimulus package.

These measures will provide strong support to the world economy and greatly boost market confidence.In this case, China's steel external demand environment will further reduce the severity of China's steel exports.

The year steel market pressure still exists

Considering that the peak of the current foreign epidemic has not yet arrived and the huge new capacity in the later stage of domestic production is expected to put into operation, the steel market pressure is expected to remain in the year.

As of March 31, Beijing time, there were more than 780,000 confirmed COVID 19 cases worldwide, according to the statistical agency.A spokesman for the world health organization also said 85 percent of the new confirmed cases are now in Europe and the United States.The number of confirmed cases in the United States is growing at a very fast pace, and it has the potential to be the "epicenter" of the covid-19 outbreak.The author predicts that the real economy and market confidence may suffer a new round of impact after the peak of the epidemic in foreign countries.

In addition, the domestic steel production capacity of a large release can not be ignored.According to statistics, there will be tens of millions of tons of new production capacity put into operation this year, it is expected that the country's total steel production capacity will continue to increase, which also brings some pressure to the steel market.