What happened to the disappearing demand for steel? 2

01 Great change: The steel industry reshuffle

Since 2023, the steel industry has shown a clear peak season is not “prosperous”, and the phenomenon of enterprise losses has expanded. This should be “hot” “golden March” turned into a “watershed” of steel prices, since the middle of March to May 31, rebar main futures prices have fallen 20.81%. The book assets of steel inventory have shrunk rapidly, and the profits of enterprises have been significantly damaged.

Chen Panfeng, general manager of Central Plains branch of Shanxi Jianbang Group, summarized the current steel market as “off-season is not light, go expected; Peak season is not prosperous, go realistic.” He said that today’s January to March off-season is expected, after March 15 to the end of May, is supposed to be the peak season, but walk is the reality, now June to July is off-season and began to walk expectations, the market is now affected by domestic policies, news and the impact of foreign capital markets is more strong. Expected to rise, expected to fall, now the financial pricing attributes of steel prices continue to strengthen, futures lead the spot in the up and down.

“Now the steel industry is still in a difficult situation, manifested in six difficult words: difficult to recover the economy, difficult to boost the real estate, difficult to fall production, difficult to fall iron ore, difficult to rise the profits of steel enterprises and difficult to do steel trade business.” In the interview, Chen Panfeng told China Steel network, now the steel industry is experiencing “the eve of change”, a great change is quietly coming, the industry to merger and reorganization, industrial restructuring, business model change, China’s steel industry development has entered a deep adjustment period.

At the “All-United Metallurgical Chamber of Commerce 2023 President (expanded) office meeting” held recently, Zhao Xizi, honorary president of the All-United Metallurgical Chamber of Commerce, said that the steel industry has three turning points in the past 20 years, and 2020 to this year is the third time, demand is shrinking, but there is no large-scale bankruptcy phenomenon, reflecting the strengthening of the toughness of various enterprises in the steel industry. That’s a very rare quality.

Ding Liguo, president of the All-United Metallurgical Chamber of Commerce and chairman of Delong Group, believes that in the next few years, even 50% of steel enterprises will be eliminated. He said that China has a billion tons of steel scale, what kind of economic structure can support such a supply. Our generation is bound to see great changes in the steel industry, and in the next few years, 30, 40 or even 50 percent of steel companies will be eliminated by market competition.

As early as a year ago, Li Chaopo, chairman of the Dedicated Group, said bluntly at the 19th internal retreat that the steel industry has entered the whole industry into losses, and the loss has not seen the head and the extent has not seen the bottom. Until 30% of the steel enterprises shut down, the steel industry can enter a state of break-even and normal operation.

“Only two types of steel companies can survive: one is a good location; The second is good management. Now the steel war has begun, the incandescent competition has been launched, into the sword battle, who dies who lives in the moment, the battle lasts at least 5 years or so, is a big reshuffle, big integration.” In this speech, Li Chuanpo judged the future situation.

02 Disappeared: steel demand structure adjustment

This year is the first year of the 14th Five-Year Plan, and it is also the first year of the epidemic prevention and control policy. All walks of life have high hopes for 2023, and people hope that after the haze of the epidemic clears, they will fight for a turnaround.

Under strong expectations, steel prices have been “soaring” since the Spring Festival. However, the good times are not long, in the face of high supply and weak demand reality, the steel market gradually entered the “peak season is not prosperous” weak demand verification period, the core of steel prices gradually changed from expectations to reality, from the middle of March to the end of May steel price trend, weak reality performance incisively and vividly, demand is expected to be falsified.

When the China Steel Network research team visited the market research, steel traders generally reflected that the demand for steel was poor, but the inventory was not high. The reason is that there are concerns about the current weakening of terminal demand. The question, then, is where the disappearing demand for steel has gone.

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