Cost support steel prices uphill

Looking at the January-July steel market, the financial crisis, the slowdown in the world economy, the macro-environment of domestic liquidity tightening, and the oversupply of production capacity and weak demand have all hit the market with a lot of confidence. . However, the price of steel products has maintained a slight upward trend under a number of unfavorable factors. During the period, it also set a new high for the listing of steel products. Among them, the increase in production costs is the most important factor supporting steel prices.

The most significant increase in production costs is iron ore. According to customs statistics, the average cif price of imported iron ore in the first half of the year was US$160.89/ton, which was the highest level in history, up 42.41% from the same period of last year. According to the average price of *** exchange rate in the first half of the year, iron ore rose by 311.48 yuan per ton compared with the same period of last year; according to 1.6 tons of iron ore per ton of crude steel, the production cost of steel increased by 498.4 yuan/ Ton. In the second half of the year, China’s steel production will remain at a relatively high level, and demand for ore will continue to maintain its strong momentum. Therefore, the tight supply pattern of iron ore will not change and the pattern of high price operation will not be broken.

After 2011, the People's Bank of China raised the deposit reserve ratio six times in total, and the deposit reserve ratio of large banks reached a record high of 21.5%; in addition, three interest rate increases were also made, and the benchmark interest rate for one year Raised to 6.56%. The continuous tightening of monetary policy has led to tight market funding and a substantial increase in the cost of capital for metallurgical companies. In the first half of the year, the interest and financial costs of the metallurgical enterprises increased by about 30% from last year. The increase in capital costs has swallowed up the profits of steel companies. In the second half of the year, under the objective of controlling prices and stabilizing growth, China will continue to maintain the continuity and stability of its policies. There will be no major shift in monetary and credit policies, and market liquidity will continue to tighten, and tightening policies such as raising interest rates will be met. Further increase the capital cost of the company.

In addition, rising energy prices such as electricity also increase the cost of steel production. This year, in order to alleviate the intensifying power shortage and curb the release of production capacity in high-energy-consuming industries, the NDRC decided to increase the prices of industrial, commercial and agricultural electricity in 15 provinces including Shanxi, Shandong, Henan and Hebei from June 1.

With the gradual increase in production costs and the slow rise in steel prices, the profit rate of steel companies has further declined. According to statistics from the China Iron and Steel Association, in the first half of the year, the profits of member steel companies of the China Iron and Steel Association were only 3.14%, down 0.4% year-on-year, which is far below the current one-year deposit rate of banks. In the second half of the year, the turmoil in the financial markets is still difficult to calm down, and the pace of global economic slowdown is hard to stop. If there is no financial crisis like 2008, iron ore's high monopoly and tight supply will strongly support ore prices. Run high. In addition, the capital cost of steel enterprises and traders will still be in a rising stage, which will increase the room for the production cost of steel products.

At present, the output of steel products has reached new heights, and the output is basically close to the limit. Steel enterprises operate at low profit, and a sharp decline in steel prices will cause steel companies to fall into a state of loss. In this case, the cost support will become even more apparent. The market price of steel in the afternoon is supported by rising costs, or it will be difficult to rise in the negative macro environment.