Self discipline and production control is the right way in the future

As novel coronavirus pneumonia has been effectively controlled and resumed and remanufactured in China, the basic pressure on domestic steel market has been alleviated. However, with the accumulation of external bad factors, the steel market will face more downside risks.

First, the spread of foreign outbreaks has heightened concerns about the global economic downturn. Novel coronavirus pneumonia was diagnosed in 1 million 840 thousand cases in Beijing at forenoon 9 a.m. in April 13th. 114 thousand cases died and 403 thousand cases were cured. At present, the epidemic situation in foreign countries is still severe, and the impact on the global economy is more and more obvious. On March 23, the International Financial Association issued a report, which predicted that the global economy would grow by 1.5% negatively this year; on March 30, the Research Institute of the Bank of China issued a report, which predicted that the global economy would fall into recession in 2020; the International Monetary Fund had previously also believed that the global economy would have a serious recession. It can be predicted that the global economic recovery process may be very slow due to the severe impact of the epidemic.

Secondly, as one of the important roles of the global economy, China is also "implicated" and its demand may be lower than expected. This is mainly reflected in the following aspects:

First, steel exports will decrease. China's steel products are mainly exported in the form of products, while some products' export orders were cancelled in April, resulting in a significant reduction in new orders, which directly affects the strength of steel demand in the domestic manufacturing industry.

Second, the digestion of the original inventory will affect the performance of the current inventory. Due to the long delay in demand this year and the high level of supply, in addition to the relatively high terminal inventory of some manufacturing enterprises, some construction enterprises also increased their stock in March. These inventories have a certain digestion cycle, which will affect the consumption of new resources to a certain extent.

Third, the release of domestic demand may not fulfill the good expectation. According to the steel industry PMI (purchasing manager index) released by the China Federation of things steel logistics professional committee, domestic steel demand recovered in March. The new orders index was 38.5%, up 5.8% on month. Due to the rapid spread of the foreign epidemic and the reduction of external steel demand, the index of new export orders dropped 15.2 percentage points to 27.3% compared with February, dragging down the overall demand.

Finally, a gradual pick-up in supply will contain the rebound in prices. Influenced by the decline of scrap price and the relatively firm price of screw steel, the steel output picked up rapidly in the middle and late March. It is predicted that the digestion pressure of steel inventory will continue to increase in the later period.

In short, the spread of foreign epidemics will bring a lot of pressure, the future is not optimistic. In this case, steel mills should strengthen self-discipline, strictly control the pace of production, especially seize the opportunity to release domestic demand to speed up the de stocking, so as to relieve the current pressure on the total steel inventory and maintain the stable and healthy operation of the market.