Since the Spring Festival of 2021, steel prices have ushered in wave after wave of increases. Although there have been multiple rounds of bearish market during this period, the overall upward momentum has remained unabated. On April 17, a reporter from China Metallurgical News interviewed Jiao Genpeng, general manager of HBIS Xuangang Longxiang Development Company. According to him, since mid-March, with the steady release of effective terminal demand in various parts of the country, the start rate of construction projects in the northern region represented by Hebei Xiong'an New District has risen rapidly, and downstream demand has been eye-catching. Jiao Genpeng said that overall, the overall trend of Hebei Steel City will continue to improve in 2021. He analyzed separately from the aspects of supply and demand, environmental protection, raw materials and fuels, and macro expectations.

From the perspective of supply, entering 2021, the Ministry of Industry and Information Technology has repeatedly emphasized the need to significantly reduce crude steel output, and implement a policy of dual control of production capacity and output to ensure that the national crude steel output in 2021 will decline year-on-year. Hebei Tangshan issued a production reduction notice in March, requiring 7 steel companies in the jurisdiction to implement a 50% reduction in production in the first half of the year, and a 30% reduction in production in the second half of the year. Another 16 steel companies have implemented the annual limit. 30% reduction measures. As a major domestic steel province in China, stricter production restrictions in Hebei will inevitably have an impact on the total amount of domestic steel, leading to a further reduction in market resources in the later period.

From the perspective of demand, the current market transaction status is relatively impressive, especially the construction steel transaction volume remains high, and the inventory of construction steel is also declining rapidly. Last week (April 12 to April 16), the average daily transaction volume of domestic construction steel remained at about 250,000 tons, and the highest transaction volume in the week reached 320,000 tons, setting a new high since the beginning of this year. From the perspective of downstream industries, the real estate market is heating up, and real estate demand remains relatively resilient. At the same time, investment in fixed assets in infrastructure, manufacturing, and transportation has all grown steadily. From the boom in production and sales of construction machinery such as heavy trucks and excavators, it can be seen that downstream demand is better. Statistics from the China Construction Machinery Industry Association show that in the first three months of this year, the 26 mainframe manufacturers included in the statistics have sold 126,941 units of various excavating machinery products, an increase of 85.0%. Automobile production and sales continue to grow, but the supply of chips may affect the production rhythm of the domestic automobile industry in the later period. In terms of home appliances, the order volume of several domestic major appliance companies has remained high. Many places have recently launched consumption promotion measures, carried out various consumption promotion activities, issued consumer vouchers, etc., involving multiple fields such as automobiles, home appliances, cross-border e-commerce, and new types of consumption. In this context, the overall demand for steel will remain optimistic.

However, Jiao Genpeng specially reminded: “The acceptance of high-priced resources by downstream terminals is still low. It will be May soon, and many parts of the south will enter the rainy season, which will suppress the demand for construction steel to a certain extent.”

From the perspective of environmental protection, this year’s Hebei Provincial Government’s work report proposes to vigorously promote the air quality of key cities to “retire ten” (national key cities’ air quality ranking) action: this year’s goal is for Hebei’s Tangshan and Xingtai to “retire ten” and next year The goal of Hebei Shijiazhuang and Handan is to "retreat ten times". In the context of carbon peaks and carbon neutrality, environmental protection and production restrictions in Hebei have become more stringent, which will play a positive role in alleviating the contradiction between market supply and demand.

From the perspective of raw materials and fuels, recently, iron ore shipments from Australia and Brazil have increased significantly, and domestic steel companies still have strong demand for iron ore. According to industry statistics, as of April 15, the imported iron ore inventory of 45 ports across the country reached 133,153,700 tons, a month-on-month increase of 2,165,500 tons; the average daily port volume reached 2.901 million tons, a month-on-month increase of 91,000 tons. Among them, the port inventory of imported iron ore from Australia reached 67.582 million tons, an increase of 2.726 million tons; the port inventory of imported iron ore from Brazil reached 41.028 million tons, a decrease of 1,469,800 tons. Jiao Genpeng said that the current domestic dependence on Australian and Brazilian iron ore is still strong, which makes it more difficult for iron ore prices to fall. However, high iron ore prices can bring cost support to steel prices.

At the same time, the coke market is operating stably. Although both are affected by the environmental protection and production restriction policy, the operating rates of both steel and coke companies have been suppressed to a certain extent, but the decline in the operating rate of coke enterprises is significantly smaller than that of steel enterprises. Overlapping the downstream market continues to improve, coke purchase demand is strong, and coke companies are more willing to increase coke prices. Jiao Genpeng predicts that coke prices are expected to stop falling and stabilize.

From a macro perspective, the steel industry is currently formulating a carbon reduction action plan. Under the influence of carbon peaks and carbon neutrality, the steel industry may face a new round of supply-side structural reforms. Jiao Genpeng said that my country's steel industry is in the "quantity reduction phase" and "high-quality period of restructuring." Low-carbon development is an important part of achieving high-quality development of my country's steel industry. On the one hand, it will accelerate the optimization of production processes, update equipment and use low-carbon energy in the steel industry; on the other hand, it will encourage steel companies to actively innovate and develop deep decarbonization technologies.