The restart of resumption of work and production represented by Shanghai has rekindled hope, but before the steel industry is the melancholy data of the first four months.
From January to April 2022, the national crude steel production fell by 10.3% year-on-year, pig iron production fell by 9.4% year-on-year, and steel production fell by 5.9% year-on-year. Among them, in April, the national crude steel output fell by 5.2% year-on-year, pig iron output was flat year-on-year, and steel output fell by 5.8% year-on-year.
At the same time, in the first four months of 2022, the growth rate of real estate investment fell by 2.7%, the growth rate of infrastructure investment increased by 6.5% year-on-year, and the investment in manufacturing industry increased by 12.2% year-on-year. These are three areas closely related to "steel demand". When the market is generally hesitant about the growth rate of real estate and manufacturing, infrastructure has been placed with great hopes.
6.5%, it seems that the growth rate of infrastructure is not bad, but according to the interview of the Economic Observer, the current consumption driving force of infrastructure is insufficient. For example, in interviews with construction machinery companies, they believed that the current debt of local governments and the arrears of upstream construction funds are relatively common, which makes infrastructure investment even if it is large, it needs to spend a considerable part to make up for it. The previous project arrears are reflected in the data, that is, the increase in infrastructure investment is relatively considerable, but the actual driving effect of infrastructure is relatively limited.
In addition, some brokerages believe that the growth rate of infrastructure construction from January to April cannot be ignored. The first point is the inflation factor. In the first quarter, the cumulative PPI increased by 8.7% year-on-year, which means that the actual investment growth rate after deducting the price factor may not be so high. For example, as the main auxiliary material for road construction, the consumption of asphalt in the first quarter decreased by 24.2% year-on-year, while the price increased by 22.7% year-on-year. The second point is seasonal factors. In the first quarter, the proportion of infrastructure investment in the whole year is generally low (usually not more than 15%), which means that the growth rate fluctuates relatively large. In addition, from the perspective of funding sources, the preposition of fiscal expenditure and the issuance of special bonds are the keys, contributing to the year-on-year increase in almost all infrastructure funds.
Can infrastructure, real estate, and manufacturing support the "steel demand" in 2022? On June 1, this newspaper interviewed Zeng Liang, a researcher at Zougang.
Economic Observer: As far as your judgment is concerned, has the steel market already activated the demand for resumption of work and production after this round of epidemic?
According to the data tracked by the steel network, as the epidemic situation in various parts of the country has improved significantly, the prosperity index of the domestic steel industry has rebounded, and the operation of various steel industry chains has recovered.
Specifically, in terms of steel production, as of May 25, the operating rate of domestic independent electric arc furnace steel mills tracked by the steel network was 66.67%, a month-on-month increase of 3.03 percentage points; the operating rate of blast furnace steel plants was 77%, a month-on-month increase. 0.96 percentage points. From a year-on-year perspective, the operating rates of domestic electric arc furnace and blast furnace steel mills decreased by 15.15 percentage points and 2.56 percentage points respectively, mainly because the current steel production profit is relatively low, which affects the production enthusiasm of some steel mills. From the perspective of steel circulation, on May 27, the total amount of terminal automobile transportation statistics from the steel network fat cat logistics increased by 2.07% week-on-week, indicating that with the gradual recovery of logistics and transportation, steel circulation began to pick up.
In addition, from the perspective of steel demand, with the overall weakening of the impact of the epidemic on the steel industry in May, the gradual recovery of logistics and transportation, the end-use steel companies have begun to resume work and production, and the downstream steel industry prosperity index has rebounded slightly month-on-month. . Looking for steel network survey data shows that in May 2022, the PMI composite index of the downstream steel industry was 49.02%, a month-on-month increase of 0.19 percentage points.
Economic Observer: What is your observation on the "quality" of infrastructure investment growth from January to April?
Although infrastructure investment has achieved a good growth rate from January to April, it is really not ideal for infrastructure to drive demand for steel at present. In addition to the reasons for the low quarterly base, there are the following reasons.
First, since the first half of the year, the policy to support stable growth of infrastructure has been significantly increased, including the development of infrastructure investment in a moderately advanced stage, the issuance of special bonds in advance, the increase in the scale of local special bonds, and the speed of issuance. It generally takes a transmission cycle from June to September to form physical workload until the funds are in place, and then to the project landing. Therefore, we believe that the infrastructure investment in the first half of the year may not be able to fully form the physical workload until the second half of the year, and then the steel consumption can be formed. need.
Second, in the first half of the year, the epidemic spread in many places across the country, and the impact lasted for a long time, causing the construction progress of most infrastructure projects to slow down significantly, making this year's infrastructure construction peak season a little later than previous years.
Third, the structure of infrastructure investment this year is also differentiated. From January to April, investment in electricity, heat, gas and water production and supply increased by 13.0% year-on-year; investment in water conservancy management and public facility management increased by 12.0% and 7.1% respectively; road transportation and railway The transportation sector increased by 0.4% and decreased by 7.0%, respectively. It can be seen that the performance of traditional infrastructure is relatively sluggish, and this trend of differentiation may continue during the year, which will also bring changes to steel demand. Under the circumstance that the strategic positioning of modern infrastructure has been comprehensively improved, new infrastructure such as computing power networks, data centers, and intelligent logistics that are not included in the calculation may achieve a higher investment growth rate, but the new infrastructure will not significantly drive the demand for steel.
Economic Observer: If the "quality" of the infrastructure from January to April is insufficient, will the infrastructure in place be further improved?
On the afternoon of May 30, the Ministry of Finance requested to speed up the issuance and use of local government special bonds and expand the scope of support, and strive to promote stable growth and investment. On the whole, the issuance and use of special bonds in various regions has generally progressed well. As of May 27, a total of 1.85 trillion yuan of new special bonds had been issued, an increase of about 1.36 trillion yuan over the same period last year, accounting for 54% of the issued limit. In addition, the Ministry of Finance stated that the provincial financial departments should quickly adjust the special bond issuance plan, choose the issuance time reasonably, speed up the expenditure progress, and ensure that the issuance of new special bonds this year is basically completed by the end of June, and strive to be basically used by the end of August.
From the perspective of steel demand for infrastructure, we believe that with the gradual availability of construction funds for infrastructure projects in various places from June to the second half of the year, the progress of infrastructure that has been dragged down is likely to be recovered after the epidemic is effectively controlled. Therefore, we expect In the second half of the year, there will still be a release of demand for rush-up construction projects in infrastructure projects. We expect that infrastructure steel use is expected to usher in growth in 2022. According to the steel demand model for steel mesh, the year-on-year increase in the demand for infrastructure steel in 2022 may be in the range of 4%-7%.
Economic Observer: In addition to infrastructure, real estate is another major consumption area for steel demand. The growth rate of real estate investment from January to April fell by 2.7% year-on-year, but local governments around the world are doing their best to try to revive the housing market. What do you think of the real estate market's drive to "steel demand" this year?
Although the real estate control policy has continued to relax, and the tight credit has also turned loose, the effect of policy transmission on the real estate is not very obvious at present.
From the perspective of real estate sales, the cumulative sales area of real estate from January to April decreased by 20.9% year-on-year, the newly started and completed real estate areas fell by 26.3% and 11.9% respectively, and the real estate construction area was basically the same year-on-year. The overall performance is still difficult to say optimistic. From the perspective of real estate land acquisition, since real estate sales and construction have not improved, real estate developers have poor willingness to acquire land, land transfer fees in 31 provinces and cities have fallen significantly year-on-year, and the cumulative area of real estate land purchases from January to April has dropped significantly year-on-year. 46.5%. Finally, from the perspective of real estate steel use, because real estate sales, new construction, and land purchases continue to decline sharply from January to April 2022, we expect that the overall demand for real estate steel will continue to be in a downward channel in 2022. According to the calculation of the main development indicators of real estate, the demand for steel used in real estate in 2022 may fall in the range of 2%-5% year-on-year.
Economic Observer: From January to April, investment in manufacturing increased by 12.2% year-on-year. What is the driving force of manufacturing on "steel demand"?
Considering the impact of the high base effect in 2021, as well as the peaking and falling of manufacturing PMI in Europe and the United States, and the inflection point of global demand expansion, it is expected that the growth rate of fixed asset investment in my country's manufacturing industry will slow down in 2022. Since Shanghai is the leading area of the entire East China manufacturing industry chain, affected by the Shanghai epidemic, China's manufacturing PMI from March to May was below the 50% line of prosperity and decline, so the Shanghai epidemic had a certain disadvantage on the East China manufacturing industry in the second quarter. influences. However, there are some positive signs from the latest manufacturing PMI for May. For example, in May, the new orders index and new export order index, which reflect the operation of the demand side of the manufacturing industry, rebounded by 5.6 and 4.6 percentage points from April to 48.2% and 46.2%, respectively, indicating that under the condition that the epidemic is gradually brought under control, the manufacturing The demand side has recovered. The production index in May rebounded by 5.3 percentage points from April to 49.7%, indicating that the production situation has also improved as the resumption of work and production and the resumption of business and markets continue to advance.
From the perspective of the manufacturing industry, in terms of automobiles, domestic automobile production and sales from January to April were 7.69 million and 7.691 million, down 10.5% and 12.1% year-on-year, respectively. From January to April, domestic production and sales of new energy vehicles were 1.605 million and 1.556 million respectively, an increase of 1.1 times year-on-year. Thanks to the high growth of new energy vehicles, it is expected that the prosperity of the automobile industry will rebound in 2022, and the production and sales of automobiles are also expected to usher in positive growth, driving the steady growth of automobile steel.
From the perspective of the shipbuilding industry, affected by the epidemic in Shanghai, the three major shipbuilding indicators of my country's shipbuilding industry fluctuated greatly from January to April. The shipbuilding cluster in the Yangtze River Delta has a more prominent impact on the shipbuilding industry due to the epidemic. But on the whole, the Shanghai epidemic has only a rhythmic impact on the demand for steel in the shipbuilding industry. Due to the production capacity of domestic shipyards, the annual completion of shipyards does not change much. According to the current order volume of 102.47 million deadweight tons in China, the consumption of marine steel in 2022 is about 15.4 million tons, which may increase by 1.51 million tons year-on-year, with a year-on-year increase of 9.6%.
From the perspective of the machinery industry, the transmission time from infrastructure construction to construction machinery sales is about 1-3 months. The peak season of construction machinery sales may be postponed to the second half of the year due to the impact of the epidemic. In addition, the expansion of overseas demand has ushered in an inflection point. The high growth of machinery exports is unsustainable. It is expected that the output and sales of construction machinery may decline slightly in 2022, and the mechanical steel may drop slightly year-on-year.
In terms of home appliance exports, considering the repeated global epidemics, the inflection point of demand expansion, and the high base of home appliance exports in 2021, the demand for home appliance exports may gradually decline. In terms of domestic demand for home appliances, it mainly depends on the purchase demand brought by the completion of real estate, but the overall domestic real estate is still in a downward channel, which will also drag down the domestic demand for home appliances to a slight decline.