After the release of macro data in April, the market’s tighter sentiment towards the policy front began to ease. With the US dollar index falling sharply in the external markets, risk appetite has increased. After the big drop, the rebar has entered its reasonable value space. Under the trend of steel production cuts, the company is facing a demand for return value.
First, the iron ore agreement price rose to 147 US dollars in the third quarter, which was a 23% increase. If we add the price increase rate in the second quarter, this price is about 140% higher than in 2009. Although the recent drop in the spot price of iron ore is relatively large, and the phenomenon of price inversion is apparent, major steel mills have stated that they will continue to purchase imported ore at the agreed price in order to avoid the emergence of iron mine long contract breach in early 2009. The domestic steel mills now have a production cost of around RMB 3,700/tonne. If they are calculated based on the ore price of US$ 147, the cost per ton will increase by RMB 300-500 to RMB 4,100/ton, and the probability of substantial appreciation in the short-term will be higher. Small, even in the medium term, the contribution to cost reduction is relatively low, about 100 yuan/ton.
At the same time as the cost rises, steel prices have continued to fall. Rebar spot prices have fallen by 17% from highs. Recently, several major steel mills such as Baosteel, Wuhan Iron and Steel and Anshan Iron & Steel have once again lowered their steel prices, and the resonance of these factors makes steel mills The gross margin has generally fallen into negative levels. In the midst of high costs and spot prices, the steel mills have chosen to cut production, and this production cut soon spread from small and medium-sized steel mills to large-scale steel companies such as Wuhan Steel and Shagang, which also made the steel industry production capacity. The utilization rate has declined, and the utilization rate of construction steel capacity in June was 90%, which is 2% lower than that in May. At the same time, the state's elimination of backward production capacity and control of "double high" policy will also curb supply to some extent.
Second, support for affordable housing, real estate investment growth continues unabated. Judging from the recent property market regulation and control policies, the government hopes to raise house prices by raising credit thresholds on the one hand, and on the other, it will increase the supply of affordable housing to guide house prices. The Ministry of Housing and Urban-Rural Development and the local governments signed the “military order†for housing guarantees in 2010, and requested to ensure the completion of the construction of 5.8 million sets of affordable housing and shantytown reconstruction of housing and 1,200,000 dilapidated houses in rural areas during the year, both of which have increased substantially compared to last year. According to the calculation of one ton of steel bar for 40 square meters, it will also pull close to 500-700 tons of construction steel demand.
In addition, according to the data released by the National Bureau of Statistics, the total construction area of ​​real estate development enterprises nationwide from January to June was 2.397 billion square meters, a year-on-year increase of 12.7%. Although the newly-started area of ​​housing fell by 10.4% year-on-year to 479 million square meters, the rate of decline was It was reduced by 5.8% from January to May. At the same time, the increase in investment in real estate development in June reached 582.9 billion yuan, an increase of 46% from the previous month and an increase of 34% year-on-year, and it is still in an upward trend. We believe that this inertia will provide effective support to the construction steel market in the third quarter, and the medium-term adverse effects of real estate regulation will be reflected in the middle and later quarters of the fourth quarter.
First, the iron ore agreement price rose to 147 US dollars in the third quarter, which was a 23% increase. If we add the price increase rate in the second quarter, this price is about 140% higher than in 2009. Although the recent drop in the spot price of iron ore is relatively large, and the phenomenon of price inversion is apparent, major steel mills have stated that they will continue to purchase imported ore at the agreed price in order to avoid the emergence of iron mine long contract breach in early 2009. The domestic steel mills now have a production cost of around RMB 3,700/tonne. If they are calculated based on the ore price of US$ 147, the cost per ton will increase by RMB 300-500 to RMB 4,100/ton, and the probability of substantial appreciation in the short-term will be higher. Small, even in the medium term, the contribution to cost reduction is relatively low, about 100 yuan/ton.
At the same time as the cost rises, steel prices have continued to fall. Rebar spot prices have fallen by 17% from highs. Recently, several major steel mills such as Baosteel, Wuhan Iron and Steel and Anshan Iron & Steel have once again lowered their steel prices, and the resonance of these factors makes steel mills The gross margin has generally fallen into negative levels. In the midst of high costs and spot prices, the steel mills have chosen to cut production, and this production cut soon spread from small and medium-sized steel mills to large-scale steel companies such as Wuhan Steel and Shagang, which also made the steel industry production capacity. The utilization rate has declined, and the utilization rate of construction steel capacity in June was 90%, which is 2% lower than that in May. At the same time, the state's elimination of backward production capacity and control of "double high" policy will also curb supply to some extent.
Second, support for affordable housing, real estate investment growth continues unabated. Judging from the recent property market regulation and control policies, the government hopes to raise house prices by raising credit thresholds on the one hand, and on the other, it will increase the supply of affordable housing to guide house prices. The Ministry of Housing and Urban-Rural Development and the local governments signed the “military order†for housing guarantees in 2010, and requested to ensure the completion of the construction of 5.8 million sets of affordable housing and shantytown reconstruction of housing and 1,200,000 dilapidated houses in rural areas during the year, both of which have increased substantially compared to last year. According to the calculation of one ton of steel bar for 40 square meters, it will also pull close to 500-700 tons of construction steel demand.
In addition, according to the data released by the National Bureau of Statistics, the total construction area of ​​real estate development enterprises nationwide from January to June was 2.397 billion square meters, a year-on-year increase of 12.7%. Although the newly-started area of ​​housing fell by 10.4% year-on-year to 479 million square meters, the rate of decline was It was reduced by 5.8% from January to May. At the same time, the increase in investment in real estate development in June reached 582.9 billion yuan, an increase of 46% from the previous month and an increase of 34% year-on-year, and it is still in an upward trend. We believe that this inertia will provide effective support to the construction steel market in the third quarter, and the medium-term adverse effects of real estate regulation will be reflected in the middle and later quarters of the fourth quarter.
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