In 2021, the fundamentals of the steel market will show the characteristics of "economic growth, strong policies, good expectations, reduced supply, increased demand, high prices, fast pace, high volatility, and high risks". The author predicts that steel prices will rise throughout the year. Varieties of materials will perform better than general materials, and steel will perform better than raw materials. The profits of steel companies are expected to rise slightly.

The operation situation of the steel market in the first quarter

In the first quarter that just ended, the steel market's operation trend mainly showed the following characteristics:

First, the price of steel fluctuated upward. According to statistics, as of March 29, compared with January 1 this year, the price of rebar has increased by 380 yuan/ton, an increase of 8.5%; the price of medium plates has increased by 630 yuan/ton, an increase of 13.6%; the price of hot coils has increased by 690 RMB/ton, an increase of 15%; the price of strip steel increased by RMB 670/ton, an increase of 14.6%. As of March 29, compared with the average price in January, the price of rebar has increased by 342 yuan/ton, an increase of 7.8%; the price of medium plates has increased by 471 yuan/ton, an increase of 10.3%; the price of hot coils has risen 432 yuan/ton, an increase of 9.5%; strip steel prices rose 451 yuan/ton, an increase of 10%.

The second is that the prices of raw materials and fuels have fallen from a high level. According to statistics, as of March 29, compared with January 1 this year, the price of iron ore increased by US$3.2/ton, an increase of 1.9%; the price of coke fell by RMB 300/ton, a decrease of 11.8%; the price of main coking coal fell by 5 RMB/ton, a decrease of 0.3%; scrap steel prices rose by RMB 370/ton, an increase of 11.9%. As of March 29, compared with the average price in January, the price of iron ore fell by US$1.1/ton, or 0.7%; the price of coke fell by RMB 224/ton, or 8.2%; the price of main coking coal fell by 8.2%. 40 yuan/ton, a drop of 2.6%; scrap steel prices rose 198 yuan/ton, an increase of 6.1%.

This year the steel market will show a "supply reduction and demand increase" trend

The author believes that the fundamentals of the steel market in the future will behave as follows:

First, the domestic and foreign economies are steadily improving. From a global perspective, 132 countries have now received the new crown pneumonia vaccine, with a total of about 410 million doses. As the scope of vaccination continues to expand and the epidemic is effectively controlled, the global economy will accelerate its recovery. From a domestic perspective, the domestic economy will grow slightly. The author believes that the main driving force of domestic economic growth this year comes from consumption and manufacturing investment. In 2021, the country will continue to expand domestic demand, expand effective investment, stabilize and expand consumption, and consumer prices will increase by about 3%. At the same time, the manufacturing industry will continue to improve. The author predicts that my country's consumption and manufacturing investment growth this year will both reach about 10% year-on-year.

It is especially important to note that this year's domestic fiscal policy and monetary policy will gradually shift from accommodative to neutral. The author predicts that my country's fiscal and monetary policies will release at least 5.7 trillion yuan in funds released this year.

The second is that crude steel output will drop slightly. Since the Ministry of Industry and Information Technology has not announced its production reduction policy, according to current data estimates, the domestic blast furnace and rolling line production capacity is showing an increasing trend. It is expected that the new rolling line production capacity will be about 34.5 million tons in 2021. At the same time, crude steel production will decline slightly. The Ministry of Industry and Information Technology requires the implementation of a policy of dual control of production capacity and production to ensure that crude steel production in 2021 will decline year-on-year. The author predicts that domestic crude steel output will reach 1.045 billion tons in 2021, a year-on-year decrease of 1.9%.

Third, the demand for steel will increase slightly. In 2021, both domestic and foreign steel demand will increase, overseas market demand will usher in a recovery growth, and domestic demand will increase slightly. The author predicts that the domestic market will basically show a balance of supply and demand in 2021, but the structure of steel demand will change, and the volume and price of industrial materials and medium and high-end steel are expected to rise.

From the perspective of downstream industries, the urbanization process and the construction of urban agglomerations continue to advance, and the demand for real estate steel will maintain high resilience; infrastructure investment will increase slightly; the automobile and home appliance industries will maintain steady growth; the demand for heavy trucks, excavators, loaders and other machinery will continue to grow ; Thanks to the continued rise in crude oil prices, steel demand for the oil and gas industry and chemical equipment industry is expected to increase slightly. In particular, the carbon peak and carbon neutral targets are expected to bring a clean energy market of nearly one hundred billion yuan. The demand for steel in wind power, photovoltaics, nuclear power, natural gas, electric vehicles, and power transmission facilities will increase. At the same time, thanks to the global economic recovery and the manufacturing industry’s business cycle, manufacturing orders will become saturated, container demand will continue to grow, and exports of mechanical and electrical and steel products will be significantly better than in 2020.

Fourth is that carbon neutrality and carbon peaks will have an impact on the steel market. Under the goal of carbon peak and carbon neutrality, the supply of crude steel is expected to decrease year by year, which will force the demand for coke and coal to decline. Energy consumption control in the steel industry will be tightened. The author predicts that Hebei, Shandong and other places may usher in a new round of capacity reduction. At the same time, the carbon peak and carbon neutral targets will force the industry to adjust the product structure, increase the proportion of high-end materials and special steel, and reduce the proportion of ordinary materials; through process upgrades, the production of lightweight and high-performance products will increase the product market. Competitiveness, to ensure that enterprises "reduced volume without reducing benefits."

Fifth, the supply pattern of iron ore will be loose. The author predicts that the increase in global iron ore supply this year will exceed the increase in demand, the global iron ore supply and demand relationship will shift from a tight balance to a loose pattern, and iron ore prices will show a "resistive decline".

This has a strong connection with the policy-side negative iron ore: First, the Ministry of Industry and Information Technology proposed to reduce crude steel production, coupled with Hebei Tangshan environmental protection production limit, restrained some iron ore demand. Second, during the "14th Five-Year Plan" period, the state plans to build one to two overseas equity iron ore mines with global influence and market competitiveness, and overseas equity iron ore will account for more than 20% of imported ore. Third, the state encourages advantageous companies in the fields of steel, transportation, energy, finance and other fields to form consortia to accelerate the construction of large-scale overseas iron ore projects in West Africa and Western Australia. Finally, promote the joint procurement of iron ore, strengthen the voice of iron ore pricing, and modify the iron ore pricing model.