Steel market: China's steel market prices will run at a high level in 2021

In 2021, China's steel market prices are at a high level, mainly supported by three factors:

First, consumer demand continues to be strong. The current mainstream view is that both domestic and foreign economies will show a recovery trend in the new year and may rebound strongly. The annual growth rate of China's economy (GDP, the same below) is above 5%, even reaching 9%, and the global economic growth rate will exceed 3%, even reaching 5%. In the new year, the economy has accelerated significantly, laying a solid foundation for the steady growth of China's steel consumption demand. Not only that, in 2021, decision-making departments will continue to make up for short-term infrastructure investment as an important starting point for stable economic growth; at the same time, real estate investment has maintained a relatively high growth rate, which has also continued to strengthen domestic steel consumption. According to preliminary calculations, my country's apparent crude steel consumption is expected to exceed 1.06 billion tons in 2021, an increase of more than 4%. It is estimated that the direct export volume of crude steel (steel equivalent) for the whole year will be about 80 million tons, and the export level will rise from decline. On the whole, China's total demand for crude steel is expected to reach or exceed 1.15 billion tons in 2021, an increase of about 5% over the previous year.

Second, the cost of smelting raw materials has risen sharply. In 2020, the market prices of raw materials such as iron ore and coke in steel smelting will continue to rise. As of November 30, 2020, the Platts iron ore price index was 132.3 points, up 42% and 52% over the beginning of the year and the same period last year respectively; the price of coke per ton in Tangshan was 2,150 yuan, which was 13.2% higher than the beginning of the year and the same period last year. 22.9%. Due to the substantial increase in domestic and foreign steel production in the new year, coupled with the depreciation effect of the US dollar, the prices of raw materials in steel smelting are likely to rise and hardly fall, and continue to operate at high levels, making the average cost of Chinese steel in the new year much higher than Last year, the cost of pig iron will be about 20% higher. The substantial increase in the production cost of steel and finished products is bound to form a strong support for high-priced operations.

The third is the weakening of supply pressure. In 2020, strong demand, new production capacity and market competition will work together to promote China's steel and finished product output, and the annual output of crude steel will jump to a new level of 1 billion tons for the first time. It is expected that the new steel production capacity will be put into production in the new year less than the previous year, and the growth rate of China's crude steel production will be 2-3 percentage points lower than the growth rate of the previous year. Supply pressure will be weakened, which will further improve the overall balance relationship.