Analysis of China's 2010 steel prices "up" where?

With the recent climax of iron ore price negotiations, the steel market prices have also begun to fluctuate. With the gradual acceleration of downstream demand recovery, steel prices have also been boosted due to rising production costs. Under such circumstances, combined with abundant market funds, the market price of steel products appears to be very flexible. Where does the price of steel rise? Become the focus of the market has become the focus of all doubts, the following author combined with the latest changes in the market for everyone to do some simple analysis, hoping to grasp the late trend of steel prices to help everyone.

Iron ore negotiations ignite steel prices

According to the traditional iron ore long agreement price mechanism, starting from April 1, Changxike Mine shall implement the new annual contract price. According to data released by the General Administration of Customs of China, China imported about 630 million tons of iron ore last year, which translates to an average price of imported iron ore of US$79.8 per ton. The current spot price of iron ore skyrocketed to 160 US dollars / ton, about twice the average level last year, China's iron ore costs are also likely to double this, reaching more than 100 billion US dollars. Vale recently announced that the company has reached an agreement with 97% of its customers under the new iron ore pricing mechanism. The fully agreed and preliminarily agreed agreement corresponds to 90% of its global contract sales. But did not disclose the price of iron ore.

Major Japanese steel companies and Brazil’s Vale have identified iron ore prices for the current year. The Japanese import price is US$110/ton, among which the highest grade ore has risen from the reference price of US$57/ton last year to US$122.2/ton. Up to 114.38%. Japan and Rio Tinto

BHP Billiton's bargaining price may also be maintained at $110/tonne. In addition, the term of the agreement has also been shortened from 1 to 3 months, and the long-term iron ore cooperation mechanism that has lasted for 40 years is now facing disintegration.

Although the 114% increase will result in the long-term FOB price of SinoSteel is much higher than the historical highest price (2008), the long-term domestic car plate price calculated by the current shipping fee is still lower than the highest point in 2008. Taking the two mines of Vale and Rio Tinto as references, the 114% increase in 2010 made the FOB price of the Changxu Ores much higher than the highest level in 2008. However, if shipping costs are taken into account, the current iron ore sea freight charges will be calculated (Tubalon-Beilun at 23.98 yuan/ton on 2010/3/27; West Australia to Beilun at 10.02 yuan/ton), taking into account relevant insurance and other expenses, Australia. The price of the long auto mine plate in China was close to the highest point in history, at 1,149 yuan/ton, and the highest price in early June 2008 was 1,164 yuan/ton. Brazil's long-term ore mine domestic car plate price is 1191 yuan / ton, from the highest point in 2008 1562 yuan / ton difference 371 yuan / ton.

Macroeconomic policies promote growth

After reviewing the entire domestic economy in the first quarter, it can be clearly seen that the economic recovery has been established. In recent days, at the 2010 first quarter regular meeting of the Central Bank’s Monetary Policy Committee, the central bank’s position was consistent with the openness of the decision-makers in recent months. It is necessary to continue to implement a moderately loose monetary policy and handle the relationship between maintaining stable and rapid economic development, adjusting the economic structure, and managing inflation expectations. The economic growth benefit needs to be improved urgently, and the market is still underpowered. The most concentrated performance is that the domestic active fiscal policy and loose monetary policy remain unchanged.

An important data appearing in the report shows that the national fiscal deficit this year is 1,050 billion yuan, which is the highest domestic deficit in history. According to the prevailing standards, the standard line of a country’s fiscal deficit should be the proportion of GDP. Not more than 3%, the country is now 2.8%. From this point of view, it is currently safe, but the amount is relatively large, and it is necessary to continue to implement a proactive fiscal policy. In addition, there was a 17% increase in M2, which also shows that moderately loose monetary policy will not change. ”

In the first half of the basic monetary control policy to maintain fine-tuning, the market recovery confidence is relatively strong, which led to the downstream industry to cover raw materials inventory, directly formed the market to accelerate digestion. Directly reflected in economic statistics, the PMI index continues to rise. In March 2010, the China Federation of Logistics and Purchasing released the China Manufacturing Purchasing Managers Index at 55.1%, up 3.1% from the previous month. The manufacturing PMI is a comprehensive index, which is weighted by five major diffusion indices in accordance with international practices. Usually the PMI index is above 50%, reflecting the overall economic expansion; below 50%, reflecting the economic recession.

From the 11 sub-indexes, all indices rose to varying degrees compared to the previous month. Among them, the production index, new orders index, new export orders index, backlog order index, purchase volume index, import index, purchase price index rose significantly, an increase of more than 4 percentage points. From the index level, the production index, new orders index, purchase volume index and purchase price index are all higher than 55%, and the purchase price index is the highest, reaching 65.1%. Driven by the PMI index, February's PPI rose 5.4%, an increase of 1.1 percentage points from the previous month, mainly due to rising prices of raw materials, fuel, and power. This shows the strong domestic demand and exports. It also indirectly promoted the exit policy in the second half of the year.

From a macroscopic point of view, it is currently the key point for stabilization and recovery to accelerate. Once the entire real economy presents a situation in which the accelerated rebound is not controlled, the monetary policy will inevitably tighten, and the series of exit policies will be gradually introduced. Among them, the most critical issue is when to raise interest rates, from the recent upward trend in housing prices, and the overall liquidity situation is reappearing. Judging from the current reality, the timing of domestic interest rate hikes may be between the end of the second quarter and the beginning of the third quarter. .

Late Steel Price Forecast

Judging from the current trend of various varieties, the hot rolling is affected by exports and the cold rolling market in the downstream is improving. The general public is getting more attention and the current price of the general price is still lower than that of the rebar. Recently, the price of hot rolled coils has continued to rise. According to the current domestic and international spreads, the hot rolled exports will have an explosive growth in the near future. In the first half of the year, the trend of high levels of operation will be impossible to avoid. Cold rolling is driven by the downstream auto industry. In the first half of the year, the consumption intensity is still guaranteed. The short-term reheating of rebar increases due to the warming of the climate, and in the upstream of the product chain, it is influenced greatly by rising raw material costs, and there is room for upward movement in the short term. The rate will not be large, coupled with the rebar consumption mainly depends on the downstream real estate industry. From the current situation, it is imperative for the real estate industry to impose new control measures due to the impact of a re-rising housing price. The rebar price trend in the second half of the year is not optimistic. Among other steel products, there is room for compensatory growth in galvanizing. On the one hand, some galvanized steels currently have lower prices than cold rolled steels of the same specifications. On the other hand, the recent surge in zinc prices will also promote galvanizing. The cost of production rose.