The latest statistics show that there are three bright spots in the current Chinese steel market, with great resilience in consumer demand. Although the weak real estate data in October dragged down the overall investment growth rate, due to the existence and effect of some supporting factors, it is expected that the growth rate of fixed asset investment, including real estate investment, will continue to recover, so there is reason for cautious optimism about the future steel market. At the same time, we should also see that the release of too much domestic production supply is still the biggest pressure on the steel market at this stage.
A, October steel market three bright spots
The current steel market appears bright spots, mainly manifested in three aspects:
The first bright spot is that the growth rate of steel consumption industry is faster than the average growth rate, especially the strong growth of new steel consumption products. According to statistics, in October this year, the national industrial added value above designated size increased by 5% year-on-year, 0.2 percentage points faster than the third quarter; Month-on-month growth was 0.33%. Among them, the equipment manufacturing industry which consumes more steel plays an obvious supporting role. The country’s equipment manufacturing industry grew 9.2 percent year on year in October, significantly faster than the average industrial growth rate. Among steel consumption products, the automobile industry increased by 18.7 percent year-on-year. In addition to the traditional steel consumption industries and products, some new steel consumption industries and products are growing strongly. According to statistics, in October this year, the national production of new energy vehicles, charging pile products increased by 84.8% and 81.4% year-on-year; The output of industrial control computers and systems and industrial robots increased by 44.7% and 14.4%, respectively.
The second bright spot is that the growth rate of investment in infrastructure and manufacturing is significantly higher than the average investment level. According to statistics, this October the country’s three major investment, infrastructure investment and manufacturing investment performance. From January to October, infrastructure investment increased by 8.7% year on year, rising to the highest level this year and accelerating for six consecutive months. Investment in the manufacturing sector grew 9.7 percent year on year, contributing more than 40 percent to the total investment growth.
The third bright spot was better-than-expected steel exports, both direct and indirect. This year, despite the complex and severe international environment, China’s steel exports still exceeded expectations. According to the General Administration of Customs, from January to October in 2022, China exported 56.358 million tons of steel, down 1.8 percent year-on-year. The export of steel in October was 5.184 million tons, up 15.3 percent year on year. Since entering the second quarter, because of a variety of factors, China’s steel exports show substantial growth. Steel exports rose 47.2 per cent year on year in May, 17 per cent in June, 17.9 per cent in July, 21.8 per cent in August, 1.3 per cent in September and 15.3 per cent in October. If this trend can be maintained, the annual steel exports are likely to reverse the decline. On the other hand, indirect steel exports as the main channel of steel exports are more robust. According to customs statistics, China’s exports of mechanical and electrical products increased by 9.6 percent year on year in the first 10 months of 2022, accounting for 57 percent of the total value of goods exported, of which automobile exports increased by 72 percent. In addition, excavator, bulldozer and other construction machinery exports also have a large increase.
The above areas are the most important areas of steel demand at present. Its rapid growth and increasing level of growth show the strong resilience of China’s steel demand this year.
Two, the future steel market support factors are still in
This year’s steel market demand related indicators, only the real estate investment is relatively weak, thus forming a major drag on investment growth. According to statistics, from January to October of 2022, the national real estate development investment decreased by 8.8% year on year, which was 0.8 percentage points higher than that in the first nine months. The weakness of commercial housing sales in the same period did not improve. In October, the floor area of the national commercial housing sales fell by 23.3% year on year, an increase of 6.8 percentage points from September. Housing sales fell 23.7 per cent year-on-year in October, 9.5 percentage points more than in September, dragging down overall investment growth. Statistics show that fixed-asset investment grew by 5.8 percent year-on-year in the first 10 months of this year, 0.1 percentage point lower than the growth rate in the first nine months of this year.
In spite of this, still can maintain future fixed asset investment and steel demand to good market confidence. From the perspective of the next stage, as the effect of the policy of stabilizing growth continues to emerge, the investment project construction is progressing steadily with the strong support of special bonds and policy-based development financial instruments, the national fixed asset investment is expected to maintain a steady growth, and the growth rate of investment is likely to increase. As a leading indicator, total planned investment in new projects rose 23.1 per cent year on year in the first 10 months of this year, accelerating for two consecutive months.
Not only that, since the beginning of this year, all regions and departments have adhered to the principle of not speculation in housing, actively promoted city-specific policies, supported rigid and reasonable housing demand, stepped up efforts to ensure the delivery of housing, and promoted the stable development of the real estate market. The results have gradually shown. Recently, the management continues to release big moves to stabilize the real estate, three good news in seven days, especially just introduced 16 heavy financial measures, from the real estate market and all links of the industrial chain to provide comprehensive support, real estate investment is expected to recover, help the overall investment growth rate.
Three leading indicators related to the real estate market and real estate investment also indicate that real estate investment is likely to recover this year. According to statistics, from January to October this year, the national commercial housing sales area fell by 22.3% year on year, and from January to September basically flat, there are signs of stabilization; From January to October, the sales volume of commercial housing fell by 26.1% year on year, the decline was 0.2 percentage points narrower than that of January to September, and the decline has narrowed for five consecutive months. From January to October, the floor space completed by real estate development enterprises fell by 18.7% year on year, 1.2 percentage points narrower than that in January to September, narrowing the decline for three consecutive months.
Due to the existence of the above supporting factors, and play an increasingly large effect, so there is reason to maintain confidence in the future steel market, can be cautiously optimistic.
Post time: Nov-17-2022