At present, overcapacity has become a difficult problem for the global steel industry, and it is also a problem that the global steel industry must face and solve. According to Morgan Stanley's report, the United States, India and Japan have performed well due to demand, while oversupply has not put a lot of pressure on the overall market, so the future performance is better; South Korea's demand outlook is bleak, while new capacity is still increasing. Although China's demand is good, the oversupply is very serious. The lack of growth in demand in Europe and the difficulty in reducing production capacity will make it difficult for the above three countries and regions to solve the problem of oversupply.
China's urbanization is the main driving force for demand
Nowadays, the growth rate of China's steel demand has slowed to a normal level, and the future urbanization construction will be the main driving force for China's steel demand. The goal announced by the Chinese government is to bring the urbanization rate to 70% by 2030. Morgan Stanley expects that every 1 percentage point increase in urbanization rate will drive demand growth of 50 million tons. These upcoming steel demand is mainly from real estate, transportation facilities (such as highways, subways) and public service facilities (such as hospitals and schools).
Specifically, real estate construction steel accounts for 42% of total demand, and infrastructure construction demand accounts for 25% of total demand. The demand for construction machinery industry accounts for 15%. Since 2011, the industry has been destocking. Although excavator sales have begun to improve in March this year, the current demand intensity is not enough to improve equipment utilization in the construction machinery industry, and it is difficult to support continued sales growth. Sales in this industry are expected to increase by 3% in 2013. Demand in the automotive industry accounts for 6%. In the short to medium term, demand in the industry is relatively strong. It is expected that sales will increase by 10% in 2013.
Overcapacity has become a difficult problem for the global steel industry
The overcapacity in China's steel industry is very serious. China's capacity utilization rate is expected to be only 77% in 2013 and is expected to increase to 83% in 2018. Although the Chinese government has been trying to phase out backward production capacity and promote industry consolidation, the production capacity has increased to 920 million tons at the end of 2012. In addition, it is estimated that nearly 50 million tons of new capacity will be put into operation in 2013. According to the actual situation, unless some steel companies are closed due to long-term losses and some excess capacity is cut, overcapacity will continue to plague the development of China's steel industry.
It is estimated that China's best terminal demand market is automotive panels and high-end special panels, and the worst demand end market is marine panels.
Europe is unable to bear the loss of capacity reduction
In the past 40 years, the European steel industry has been lacking in structural demand growth, reflecting that its economic development has entered a mature period and even an aging period. Steel demand began to shift from investment-driven to consumables, which led to a continued decline in steel demand intensity.
At present, the surplus steel production capacity of the EU-27 is about 40 million tons. In terms of varieties, the overcapacity of long products and commodity grade boards is even more serious. In terms of regions, structural overcapacity in Eastern Europe and Southern Europe is even more serious. Although from an economic point of view, cutting part of capacity in Eastern Europe is significant for resolving overcapacity in Europe, these mills remain operating due to lower labor costs.
It is expected that the best steel end market in Europe is steel plates for the automotive, oil and gas industries, and the poor end steel market is the construction industry. ArcelorMittal has a 50% and 35% to 40% market share in these two areas.
Japanese restructuring effect inhibits overcapacity
The current development of the Japanese economy is very mature, resulting in a lack of structural growth in the country's steel market. Japan's steel demand is expected to increase by 4% in 2013.
Due to earthquake reconstruction and public facilities in Japan, demand for the Japanese construction industry increased by 7% year-on-year in 2012. Before 2015, earthquake reconstruction factors will continue to support Japan's steel demand, and will gradually return to 2011 levels. Demand in the automotive industry has fluctuated in recent years. However, the loose monetary policy implemented by the Japanese government has caused the yen to depreciate, which is conducive to the export of automobile products. Demand from the shipbuilding industry will continue to decline and will slow down to a lower equilibrium point in the future.
On the supply side, the operating environment will be relatively good because of the new integration of Japanese steel companies, resulting in a decline in production capacity.
It is expected that Japan's best terminal steel market will be the long products market driven by the construction industry, especially the H-beam and rebar market. The poor terminal steel market is stainless steel products and shipbuilding board products.
The rest of the world in the United States is hard to be alone.
As a developed country, the future demand outlook of the United States is favored by the industry. It is expected that the apparent steel demand in the United States will increase by 2.8% in 2013. After 2014, as the recovery trend begins to stabilize, the overall demand situation will be greatly improved. The demand growth is expected to be 4.2%. During the period from 2015 to 2018, the average annual demand growth rate is expected to reach 4.6%. The main areas driving demand are the improving non-residential construction market, the recovery of the manufacturing market and the shale gas market, which is expected to grow strongly.
On the supply side, oversupply and import markets remain issues of concern.
Overcapacity in the US steel industry has caused RG Steel to go bankrupt, resulting in the closure of 6.5 million tons of steel capacity. However, the recent increase in steel production capacity in the southern United States has filled the supply gap. In the case of global overcapacity, the United States is hard to be alone. Although its market demand prospects are promising, the problem of oversupply has become an important factor limiting market price increases. In this regard, the US steel industry has still not come up with an effective solution.
In addition, the import market is another challenge for the future development of the US steel industry. In the past few years, due to fierce competition in the import market, steel prices in the US market have become more volatile. When the price difference between the US steel market price and the foreign steel market price exceeds US$100/short ton (mainly due to the trade friction cost and the extension of the order delivery time), the high price in the US domestic market will attract a large number of imported products. This has inhibited further increases in local steel prices.
Morgan Stanley expects that the capacity utilization rate of the US steel industry will reach 83.8% in 2014, and the average capacity utilization rate will reach 89.2% between 2015 and 2018.
It is expected that the best terminal steel market in the United States will be a non-residential construction market, and the United States Nucor and Steel Dynamics will have better development; the poor end-use steel market is a thin-plate product.
Indiaâ€™s oversupply is a false proposition
As a large developing country, the main sources of demand for steel in India are in the automotive industry and infrastructure.
India's automotive industry's strong steel demand consumes a large number of high-end flat products, such as high-grade cold-rolled sheet products and coated sheet products. Steel demand in the automotive industry is expected to account for 12% of India's total steel demand. In terms of infrastructure and construction, in view of the fact that the Indian government is strengthening domestic infrastructure construction such as railways, ports, airports and urban infrastructure, demand for long products in India will have a relatively healthy growth rate in the next five to seven years.
In the case of better demand, India's oversupply is a small probability event in the future. This is mainly because the government's iron ore mining ban has led to a shortage of raw materials, which will seriously affect steel production. At the same time, new steel projects are frequently postponed due to problems such as land, environmental compensation and shortage of funds caused by new projects. In fiscal year 2013 to fiscal 2017, India's steel production is expected to grow at a compound annual growth rate of 8.2%.
It is expected that India's better terminal steel market is automotive thin sheet. Among them, Tata Steel has a 52% market share, and Bhushan Steel (BhushanSteel) accounts for 47%.
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