China became a net importer of steel for the first time in 11 years

In late July this year, an employee familiar with China's iron and steel industry made an analysis to the media: "before the epidemic has completely dissipated, China's steel production, demand and the resulting demand for iron ore will exceed the expectations of the global market.". At the same time, according to customs statistics, in June this year, China imported 1.63 million tons of steel, an increase of 129% over the same period of last year, and exported 1.43 million tons of steel, a decrease of 73% over the same period of last year. After offsetting each other, China's net import of steel was 200000 tons.

The last time China became a net steel importer was in 2009

According to customs data, in March 2009, China exported 1.67 million tons of steel products, imported 1.27 million tons of steel products, net imported 460000 tons of billets, and accumulated net imports of 60000 tons of steel products. At that time, it was mainly due to China's announcement of a four trillion yuan stimulus plan for infrastructure investment in November 2008, which greatly increased domestic steel demand. According to S & P's global report, China's steel production reached new highs month by month in the second quarter of this year. This is mainly due to the pull of real estate development and infrastructure investment, as well as domestic manufacturers hoarding inventory to cope with possible shortages in the future.

As a raw material of steel, China's crude steel output also shows a growth trend. According to the latest data released by the national development and Reform Commission, China produced 500 million tons of crude steel in the first half of the year, an increase of 1.4% over the same period last year. Li Xinchuang, chief engineer of the Institute of metallurgical industry planning and research, said at the 11th China Iron and Steel Development Forum this year: "the average daily output of crude steel in China is 2.75 million tons, equivalent to the annual output of crude steel will exceed 1 billion tons. China's steel output this year will account for more than 56% of the world's, especially in June, the daily output of crude steel will exceed 3 million tons for the first time, a record high.".

According to the analysts of the national iron and Steel Research Center, with the continuous optimization of the normalized epidemic prevention and control measures, the country's counter cyclical regulation will continue to increase, the investment in the short board will be significantly accelerated, and the investment in infrastructure and real estate will pick up rapidly. These factors strongly support the demand of the steel market in the second half of the year. Real estate, infrastructure, automobile, household appliances and ships are the downstream application fields of iron and steel, mainly in real estate. At present, the domestic steel market is in the off-season demand, and the weather factors affect the market delivery rhythm. However, the market has a strong expectation for the obvious growth of demand in the peak season in the second half of the year. Coupled with the strong supporting factors in the cost side, the steel market is in a situation of three strong and one weak, namely strong expectation, strong supply, strong cost and weak demand. Strong cost refers to the high cost of steel-making raw materials including iron ore.

At present, the rainy season in southern China is about to pass, and the steel demand situation will improve, which will also drive the demand for iron ore to rise, which will force the steel market to be in a high-level shock situation. It is expected that the steel market will present a high-level shock situation this week. This week, the average price of steel is about 4020 yuan / ton, with an average fluctuation range of 10-50 yuan per ton, which is basically the same as that at the beginning of the year. According to the analysis of industry insiders, under the influence of the new crown epidemic and other factors, China's crude steel output will continue to grow by about 2% year on year this year.

China's crude steel output reached 996000000 tons in 2019, up by eight percent compared with the same period last year. The higher than expected demand for iron and steel in China has also consolidated the tight balance of iron ore market. BHP, Rio, FMG in Australia and vale in Brazil are the main iron ore giants supplying Chinese steel mills. In the first quarter of this year, the hurricane weather in Australia, the long rainy season extended to may in Brazil, and epidemic factors affected the supply of iron ore, resulting in a steady rise in iron ore prices in the first half of the year. At the end of May, the Proctor iron ore spot index with 62% iron grade broke through US $100 per ton, and fluctuated slightly between us $100 and US $113. Compared with the lowest price at the beginning of this year, the price has increased by more than 25%.

At present, China has resolutely curbed the possibility of real estate speculation, reasonably promoted infrastructure projects, and steel exports continued to decline. Due to China's suppression of real estate speculation, the infrastructure construction will be steadily promoted. In addition, the steel export will continue to decline, and the overall steel market will tend to be stable, which will also lead to the alleviation of the contradiction between supply and demand of iron ore. On the iron ore supply side, although the epidemic situation in Brazil is still intensifying, Vale, the world's largest iron ore producer, has repeatedly reiterated that it can maintain the delivery plan, and the market's confidence in it is gradually recovering. If there are no accidents, iron ore prices in the third quarter are mainly weak shocks and slow downward adjustment.