The prospect of the iron and steel industry is still not optimistic

From the price of steel to profitability of iron and steel enterprises, the steel industry went through a process of shock in 2011. In 2011, steel production reached 8.81 million tons, up 12.3% over the same period last year, and the steel price composite index increased by 11.03% over the same period last year. However, the average price of iron concentrate in the same period increased by 17.79%, higher than that of steel prices, and the net profit of most iron and steel enterprises decreased. Companies that own resources and companies that are less affected by the price of raw materials are doing well.
Steel prices continued to decline in early January this year and February. Since March, as demand has turned warm, steel prices have risen steadily, and iron ore prices have declined slightly as the overall supply exceeds demand, and the profitability of the whole industry has begun to improve. Although the whole steel industry is still in a deficit state in the first quarter, the deficit has been greatly reduced.
From the demand data in March, the growth rate of fixed asset investment continues to decline, and the growth rate of real estate investment is also declining. In March, the cumulative investment in real estate development decreased to 23.5%. Affordable housing is still the biggest stimulating factor in the real estate market. With the gradual warming of the weather, the area of real estate starts to expand gradually, and the demand for long materials in steel will be gradually released. But before the real estate restrictive policy is abolished, the year-on-year growth rate of investment may continue to decline. In March, vehicle output increased slightly compared with the same period last year. After the 1 and February high base effect disappeared, it is estimated that the annual vehicle output will increase by one digit. From the data of household appliances output, the appliance industry has gradually stepped out of the shadow of the end of household appliances subsidies, especially the production of color TV has increased significantly. In the mechanical aspect, in addition to the large decline in the impact of railway locomotives on the investment reduction of the railway system, other machinery has been increased and reduced. In general, the situation of the machinery industry is continuing to improve. Steel demand is expected to continue to increase in the coming months. The demand for building materials will increase or decrease gradually, and the demand growth will continue to rise.
The supply of steel has increased more rapidly. In March, the output of pig iron, crude steel and steel increased by 5.05%, 3.64% and 9.61% respectively, and output reached a record high. At the same time, inventory decline slowed down. In 2011 3 and 4 months, the stock of rebar decreased by 1 million 636 thousand and 400 tons, but this year it dropped by only 959 thousand and 700 tons.
The price of steel ended in mid April, and began to fall. The national steel price index has gone out of a flat parabola. From the case of various steel, the change of the ring ratio is within 0.5%. Late release capacity pressure is greater, steel prices upward space is not large.
According to the China Association of iron and steel industry, by the end of 2011, the crude steel production capacity of the country has exceeded 8 billion tons, and the capacity to be built will exceed 2.5 billion tons. The iron and steel industry "12th Five-Year plan" estimated that the demand for steel in 2015 was only 7.5 billion tons, and the problem of excess capacity was still serious.  When demand is warmer and capacity expansion is going on, steel prices may go out of the trend in May, and iron and steel enterprises will inevitably encounter the problem of increasing volume and decreasing prices.
The two quarter profit improvement of iron and steel enterprises is a big probability event, but the price of raw materials is also the same, the shadow of overcapacity is lingering, and the power of the steel enterprise's profit continues to rise. Therefore, we believe that the steel industry in the two quarter is still not optimistic.

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