Under the epidemic situation, overseas steel mills have begun to cut production on a large scale. Steel prices have entered the "bear cycle"?
Recently, the overseas epidemic has continued to spread. Many European and American countries have adopted measures such as lockdown, traffic interruption, and suspension of work to combat the epidemic, and the impact on the global economy has continued to appear. As an important industry for global steel demand, automobiles have been greatly affected by the epidemic. European, American and Asian car companies have fallen into a difficult period, and have begun to see large-scale production cuts, which may have a greater impact on the demand of the global steel industry.
From January to February 2020, global pig iron output in countries and regions other than China has experienced a 4.3% year-on-year decline. In March, global steel companies' production cuts became more concentrated. We use annual pig iron output to fall by 5%, 10%, and 20% respectively. In 2020, global pig iron output will decrease by 22.8 million tons, 45.61 million tons and 91.23 million tons, respectively. The demand for ore is 36.49 million tons, 72.98 million tons and 145.96 million tons, and iron ore demand will face greater downside risks in the later period.
Although the epidemic has been well controlled in China, the overseas epidemic is still spreading, overseas orders have fallen, and steel exports have been blocked. Import resources such as steel billets and hot coils have begun to increase. It is expected that the downward trend in exports will be in the future It will be difficult to ease the situation in the next few months. The decline in exports and the increase in imports will put greater pressure on the domestic steel market resource supply.
Downward pressure on the global economy is increasing, steel demand is weakening
At the special summit of the G20 leaders on the new crown pneumonia held on March 26, WHO Director-General Tan Desai said that the new crown pneumonia pandemic is growing at an exponential rate. If not all countries take active measures, millions of people may be killed. This is a global crisis that requires a global response. The new crown virus has already had a global pandemic, which has had a greater impact on the supply and demand of the global steel industry. Recently, overseas steel companies announced a significant increase in production reduction, which will have a certain impact on global iron ore demand and my country's steel exports.
As an important industry for global steel demand, automobiles have been greatly affected by the epidemic. Automakers in Europe, America and Asia are in a difficult period and are beginning to see large-scale production cuts.
In Europe, as of now, mainstream automakers such as Volkswagen, Daimler, BMW, and Toyota have closed more than 70 factories in Europe, with a shutdown period ranging from 4 to 6 weeks. The development of the local auto industry in Europe has been forced to stagnate and the auto industry The time to return to normal cannot be determined.
In the Americas, auto plants across North America have been closed in the past few days. Although some of these factories were originally scheduled to resume work at the end of this month, the emergency order from Michigan Governor Whitmer lasted until April 13. Ford said this week that it will indefinitely extend the time it takes to close its North American plants. The American automaker General Motors said on March 26 that all its salaried employees will temporarily cut their salaries by 20% in order to save cash for the company in the face of the COVID-19 pandemic. The decision will affect nearly 69,000 employees. ALG, a subsidiary of the automotive research and sales platform TrueCar, predicts that the worst-case scenario is that the plant closure cycle lasts throughout the summer, so that the annual US car sales will be 5.7 million units lower than the previously expected 16.9 million units. And even if most factories resume work before May 1, sales this year will fall by 1.6 million units.
In Asia, in February of this year, Hyundai Motor Group experienced a disruption in the supply of parts and components, and has suspended vehicle production at its Korean plant. It is reported that Hyundai Motor has seven factories in South Korea, and South Korea is also the largest production base of Hyundai Motor. On March 18, Hyundai closed its assembly plant in Montgomery, Alabama. Currently, Hyundai Motor's plants in the Czech Republic and India have also suspended production. Under multiple pressures such as the disconnection of the supply chain, the shutdown of factories, the closure of dealers, and the shrinking market demand, Korean automakers and component manufacturers are facing an unprecedented survival crisis. The industry predicts that South Korean auto parts companies may undergo chain failures within two months.
The global manufacturing industry, represented by automobiles, was hit by the epidemic and began to see large-scale production cuts, which will inevitably have a major impact on the global steel industry demand.
Car production cuts are more intensive after the Spring Festival in 2020
Since 2019, global economic growth has slowed, steel demand has fallen, and overseas steel mills have begun to reduce production. Due to the decline in scrap steel prices, long-process steel mills have weakened their competitive advantages over electric furnace costs, and the reduction of pig iron is greater than that of crude steel. According to data from the International Steel Association, in 2019, countries and regions other than China produced 874 million tons of crude steel, a decrease of 0.7% year-on-year; the co-produced iron produced 456 million tons, a year-on-year decrease of 4.8%. From January to February 2020, countries and regions other than China produced 138 million tons of crude steel, down 1.8% year-on-year; and produced 73 million tons of pig iron, down 4.3% year-on-year.
After the Spring Festival of 2020, as the new crown pneumonia epidemic continues to spread overseas, the production of overseas steel mills has been affected to varying degrees. After entering March, the epidemic situation in Europe and the United States has become more serious. Many countries have begun to restrict economic activities, and steel companies are experiencing decline in demand and the epidemic. Production cuts were concentrated under the influence of prevention and control. According to incomplete statistics, the information on production cuts of overseas steel companies from February to March is as follows:
my country's steel exports are becoming more difficult
Boone, chief economist of the OECD, recently stated that the current global economic shutdown is equivalent to 25%-35% of global GDP. On March 23, the President of the International Monetary Fund (IMF) said: “The global economic growth in 2020 may see a recession, at least as bad as the financial crisis or worse, but we look forward to a rebound in 2021.”
We refer to the changes in global crude steel and pig iron output during the 2008 financial crisis to speculate on later changes in output. In August 2008, European and American financial institutions concentrated on the huge losses caused by the US sub-prime mortgage crisis, and financial risks quickly spread to the entity. Since September, the world's crude steel and pig iron production has declined year-on-year, and since then, the year-on-year decline has continued. Expansion. From November 2008 to July 2009, the global crude steel and pig iron output fell by more than 20% year-on-year, except for China. It was not until November 2009 that the crude steel and pig iron output turned from negative to positive year-on-year. From October 2008 to September 2009, the global output of crude steel and pig iron, except for China, decreased by 28.13% and 28.93% respectively.
From January to February 2020, global pig iron output has fallen by 4.3% year-on-year, except for China and countries and regions. In March, global steel companies reduced production more concentratedly. According to the latest estimate of the European Center for Disease Control and Prevention, the possibility of the new crown epidemic ending in the summer when the temperature rises is low. Even if the global epidemic can be basically controlled at the end of the second quarter, the impact on the real economy will continue throughout 2020. We use annual pig iron output to fall by 5%, 10%, and 20% respectively. In 2020, global pig iron output will decrease by 22.8 million tons, 45.61 million tons and 91.23 million tons, respectively. The demand for ore is 36.49 million tons, 72.98 million tons and 145.96 million tons, and iron ore demand will face greater downside risks in the later period.
In addition, from the perspective of my country’s steel exports, since 2015, my country’s steel exports reached a record 112 million tons, and thereafter it has declined year by year. By 2019, steel exports fell to 64.29 million tons, a year-on-year decrease of 7.28%, compared with 2015. The peak level dropped by 42.8%. From January to February 2020, my country's steel export volume was 7.811 million tons, a year-on-year decrease of 2.886 million tons, down 27%, and the fastest rate of decline since March 2018.