What factors effect Chinese steel price in 2020?
In order to have better prediction for steel price trend in 2020, it is better to focus on following three factors:
1. Macro counter-cyclical adjustment and enhanced Infrastructure investment will boost steel demand in the first half of 2020
In 2019, the global economic has been becoming slowdown, the global central banks have started a new round of easing. IMF, OECD and the European Central Banks have continously lowered the expection of global economy in 2019 and 2020.
3% World economic growth
3.4% World economic growth
2.9% global economic growth
2.9% global economic growth
European Centeral Banks
20% chance for negative growth in EURO area
So for China's central bank, there is space for further interest rate cuts in 2020. On one hand, some people believe that the MLF and LPR is expected to continue to be lowered 2-3 times in the middle of 2020. On the other hand, Chinese government has increased the special funds to support for infrastructure investment.
2. The international trade situation has eased, while the steel export will hardly grow.
As 2020 is the US election year, before the US election in November, it is generally believed that China-US relations are expected to improve compared to this year, which is beneficial to boost the market confidence and also to help ease Chinese export pressure.
Due to the reduced global economic aggregate and shrinking demand, the decline in steel prices in the global market has led to a long-term contraction in steel exports. Therefore, to observe the export situation in 2020, it must be related to fluctuations in domestic steel prices, substitution, global economic growth trends, and international steel price trends.
3. The whole supply and demand structure is loose
3.1 Crude steel output is expected over 1 billion in 2020.
It shows that the blast furnace project will have a production capacity of about 70.72 million tons in 2020, and most of them will be capacity replacement projects. Based on the blast furnace and electric furnace production in 2020, it is predicted that the net increase in output in 2020 is to be more than 30 million tons, and the peak period of supply will appear in the second half of 2020 to 2021.
3.2 Infrastructure investment and real estate are important supports for "steel demand" in 2020
As an important starting point for "stabilizing" the economy, infrastructure investment will continue to play an important role in counter-cyclical adjustment in 2020.
Under the strong support of special debt for infrastructure investment, the 1 trillion yuan of additional special funds will play an important role in the first half of next year.
At the same time, under the general direction of "stabilizing" the property market, real estate regulation and control next year will pay more attention to the double-direction regulation. It is expected that the resilience of real estate investment will continue in 2020, especially in the first half of 2020, and it is expected to continue to maintain double-digit growth, and the large construction will continue to support steel demand at home.