Three factors affecting the steel market in the first half of the year - Shandong Jiugang Tisco Steel Co., Ltd.

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Three factors affecting the steel market in the first half of the year

Three factors affecting the steel market in the first half of the year

If there are no major accidents, it is expected that the national steel and black series commodity market will fluctuate upward in the first half of this year, which is mainly driven by three factors.

1. Measures to stabilize growth have been introduced one after another, and domestic steel demand has stabilized

In order to resolve the downward pressure on the economy, for some time, the state has successively introduced a series of measures to stabilize growth, including intensive approval of fixed asset investment projects, loosening of the real estate market, reduction of bank deposit reserve ratios, “interest rate cuts” in some areas, and early issuance of local government bonds, etc. . At present, the effectiveness of the above measures has begun to show, and a large number of investment projects have been started. In February, China’s manufacturing purchasing managers’ index (PMI) was 50.2%, up 0.1 percentage points from the previous month, and continued to be above the line of prosperity and decline. In the first two months of this year, import and export trade started well, showing double-digit growth. Guaranteed by the policy-making departments’ measures to stabilize growth, it is expected that the demand for steel and black series commodities will grow steadily throughout the year, thus laying a solid foundation for the improvement of the steel market throughout the year.

2. Under the situation of severe global inflation, the market of steel and black series commodities is difficult to be immune to

Because central banks around the world, especially those in Europe and the United States, generally implemented extremely loose monetary policies and large-scale fiscal deficits, the liquidity was severely flooded, and after years of accumulation, it finally triggered severe global inflation. Currently in the world, almost all commodities, from primary products, investment products, to final consumer goods, have experienced substantial price increases without exception. Some commodities, such as oil, natural gas, coal, non-ferrous metals, wheat, corn, etc. There have even been price spikes. According to relevant information, the international oil price has been fluctuating upward since December 2021, and by February this year, the increase has exceeded US$30/barrel in just two months. The price of Brent crude oil futures in March rose above the $100/barrel mark. There is a view that the oil price in the international market will break through US$150/barrel in the future, or even reach US$180/barrel. In addition, the price of container freight on major global routes has also risen several times and is still rising. Driven by this, the inflation rate in major countries in the world has hit a new high, among which the inflation rate in the United States has reached the highest level since 1982.

The driving force of inflation this year is not only from the previous indiscriminate liquidity, but also from the recent conflict between Russia and Ukraine, which has greatly pushed up global oil and gas and coal prices, oil and gas and other energy prices, and pushed up global grain and oil prices. The high prices of these upstream products will also drive up the price of electricity, fuel prices, food prices, logistics costs and wage costs, and downstream industry costs will also rise, resulting in even more fierce price increases. This is the so-called “dead loop”: rising prices push up costs, which raise prices, which raise costs again. Not only that, the trade protectionism implemented by the United States and other Western countries and mutual increase of customs tariffs have also increased import costs and stimulated price increases.

In conclusion, we are in an environment of headline inflation. The comprehensive and substantial price increase of food, logistics and other commodities and service costs will inevitably push up the production and logistics costs of steel and black series commodities directly and indirectly, and further stimulate their price increase requirements. In this big environment, don’t expect steel and black series products to stay out of the way and be alone. Since countries in the world have been over-issuing currency for many years and have accumulated a huge flood of liquidity, this round of price increases and the upward push for the prices of steel and black series commodities will continue for a period of time, in a short period of time. Difficult to end.

3. Geopolitical risks and epidemic uncertainty, resource supply faces “supply shock”

The dominant factor affecting the price of steel, in addition to the above-mentioned costs, is the relationship between supply and demand. It should be said that the demand for steel and smelting raw materials is relatively stable this year, and the steady growth trend will not change significantly throughout the year. However, in terms of supply, there will be some uncertainties, which will cause one of the three economic pressures. “Supply shock” “. It should be said that the biggest stimulus for the recent surge in commodity prices comes from market concerns about “supply shocks”. Generally speaking, this “supply shock” this year may come from three sources.

1. Uncertainty about the development of the epidemic. At present, the global epidemic situation is still serious, and there is no sign of ending soon; the domestic epidemic is also showing a sporadic and multi-point outbreak, and there is still a long way to go before it is all cleared. This has created the uncertainty of the epidemic, which will have a certain impact on the production and life of relevant areas.

2. Geopolitical risks. The most prominent geopolitical risk this year is the conflict between Russia and Ukraine. Due to the outbreak of the Russian-Ukrainian conflict, the market atmosphere of “cut-off” of important commodities has been strong, resulting in a sharp rise in global commodity prices. The Bloomberg Commodities Spot Index, which tracks 23 futures contracts, rose 4.1% on March 1. The index has more than doubled from a four-year low hit in March 2020, at the start of the pandemic, for the biggest gain since 2009. Among them, on March 1, the price of crude oil futures in New York rose above US$105 per barrel, the first time since 2014; Brent crude oil soared to around US$120 per barrel during the session, the price of nickel hit a record high, the price of zinc exceeded US$4,000, and the price of wheat It rebounded to the highest level since 2008; the price of coal, especially thermal coal, also surged. Commodity prices due to sanctions and supply chain disruptions are expected to continue to rise or remain at record highs until the situation escalates significantly. And because the Russian-Ukrainian conflict is regarded by the United States as a great opportunity to consume Russia’s national strength, the United States does not want a quick truce, so it is difficult to stop the Russian-Ukrainian conflict in a short period of time, and its concerns about the impact on the supply of steel and black series commodities will continue. The bullish influence will continue accordingly.

3. Resource nationalism. In recent years, the so-called “resource nationalism” has appeared in the resource market. Once there is a shortage of resource supply, or a possible shortage, almost all countries will use the excuse of “prioritizing their own interests” to reduce or even stop the production of related products. Export. For example, Indonesia once stopped the export of thermal coal and bauxite, and recently banned the export of nickel ore; India also stopped the export of iron ore. In addition, some countries will use resources as weapons to attack the economic development of other countries, or use them as the “killer” of “economic conflicts”. For example, there have been “oil weapons” and so on. From the perspective of development trends, “resource nationalism” is on the rise, which may also cause “supply shocks” for steel and black series commodities.

Due to the influence of the above three factors, it can be expected that, if there are no major accidents, the overall trend of the steel and black series commodity market in the first half of this year is expected to fluctuate upwards.

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