China's steel demand will not shrink in 2020

Overall, the new outbreak of crown for the impact of China's economy is mainly on the demand side, this is because, people in order to escape the outbreak curtilage in the home, as much as possible to reduce or stop out activities and travel, the resulting end of goods and services, such as transportation, tourism, catering, shopping, entertainment and other demand shrunk dramatically.The downturn in these industries, with their workers' incomes plummeting, will make personal consumption worse.At the same time, the decrease of some production activities will also reduce the consumption of intermediate products, and have a negative impact on the chain, resulting in a corresponding decline in the total demand of the whole society.

In contrast, the impact on the production side of the supply side is not great.Especially for China, a "world factory" with a complete range of production categories, as long as there is demand, it can immediately organize production.For example, the rapid start-up and upgrading of the production capacity of masks, sanitary protective products and disinfectants in China is a clear proof of this.Similarly, even in the first two months of this year, the worst of the country's epidemic, crude steel production rose 3.1 per cent year-on-year.

Chinese steel demand will not shrink

From the perspective of the development of the epidemic in the future, due to its spread around the world and weak corresponding measures, it is difficult to end the epidemic in the global scope in a short time, or even a more severe situation will emerge, and more and more countries and regions or will start "city closure".This tells us that the impact of the epidemic on the demand side will continue, and the pressure on China's external demand will continue to exist, and will continue unabated, and will be transmitted to domestic production demand, that is, the demand for intermediate products.There is a view that the impact of the outbreak on European and us countries and global economic growth may be greater than the last financial crisis.

That said, there will be no such weakness in China's steel demand under the outbreak.That is to say, under the same severe epidemic situation, due to the strengthening of counter-cyclical regulation, China's domestic steel demand in 2020 will not reduce the volume, but will expand against the trend, thus driving the total demand (including exports) to continue to grow.

According to statistical data, in the first two months of this year, the apparent consumption of crude steel in China was 148.63 million tons, up 5.5% year on year.But the apparent consumption is not the real consumption, we must also consider the inventory changes in the same period.Since the beginning of this year, there has been a large increase in the national steel inventory, Lange steel cloud business platform monitoring data shows that by March 13, 2020, Lange steel net statistics of 29 key cities steel social inventory of 23.127 million tons, 7.42 million tons more than the same period last year, an increase of 47%.In the same period, steel enterprises also increased their inventories by nearly 7 million tons, so the actual consumption of steel in the first two months of this year has decreased somewhat.It is expected that after entering the second quarter, as the national economic life turns to normal, production enterprises and construction into the peak season, the early accumulated huge inventory will be gradually digested, so it is expected that the second quarter of the real steel consumption is expected to achieve growth.

On the other hand, Europe and the United States because of the spread of the epidemic economic downward pressure increased, but also prompted a major "rescue" measures.Recently, the media reported that the us trump administration is expected to announce a stimulus package of about 1 trillion dollars.Between $500 billion and $550 billion of that will be used to pay people directly or cut taxes;$200-300 billion will go to small business aid;Between $50 billion and $100 billion will go to aviation and industry relief.Led by the United States, the world's major countries will follow suit, and the introduction of strong stimulus measures may be able to reverse the global economic recession in 2020;In addition, global demand for "anti-epidemic" products boosted China's exports.As a result, China's external demand environment, including steel exports, is not particularly bad.At the same time, foreign trade policies are releasing and bearing fruit.On March 17, the ministry of finance and the state administration of taxation raised the export tax rebate rate of 122 items of steel and its products to 13%, which will help boost the enthusiasm of enterprises to export.To sum up, China's crude steel consumption (including exports) will exceed 1 billion tons in 2020, and the growth rate above 3% will not change.