High consumption for three consecutive quarters is the fundamental reason for the rising price of the black industry chain.In the first quarter of last year, domestic steel consumption fell by 12%, but from the second quarter, consumption rose to 15%, the growth rate in the third quarter increased to 20%, and it is expected that the fourth quarter will still maintain a growth rate of more than 15%.The core of strong consumption is still the global "flood irrigation" after the epidemic, which leads to the expectation of strong economic recovery. In China, not only the construction investment sector recovers strongly, but also the manufacturing industry strengthens comprehensively in the second half of 2020, forming the pull effect of the two engines.Overseas consumption began to recover rapidly in the fourth quarter of last year, further boosting global steel consumption.

The steel consumption troika made concerted efforts

The micro performance of high steel consumption: the recovery of the domestic real estate industry beyond expectations, the strong maintenance of government-led infrastructure investment, the growing export caused by the overseas economic recovery after the epidemic, and the strong recovery of the manufacturing industry.The steel consumption troika made concerted efforts.The rapid growth of construction machinery for half a year fully demonstrates the high activity of domestic construction activities.Excavator sales growth rate maintained a high growth rate of more than 50%, real estate sales area continued to increase by more than 10%.At the same time, some economic indicators also reflect China's economic activity, such as the secondary industry electricity consumption maintained a high growth rate of more than 8%, machinery industry electricity consumption maintained a growth rate of more than 15%, automobile production and sales continued to maintain a growth rate of more than 10%, driven by exports, household appliances continued to maintain a high growth rate of 15%.On the other hand, PMI indexes in Europe and the United States, where the epidemic is severe, and Asia, where the epidemic is relatively mild, have reached new highs.This shows that in the process of economic recovery, global steel consumer sentiment is rising.In addition, since the fourth quarter of last year, the national capacity constraints, thermal coal daily consumption continued high growth, a container is difficult to find, the CCFI index soared, all indicate that global economic activity accelerated recovery.

In November last year, the growth rate of overseas crude steel consumption turned positive for the first time in this year. The consumption growth rate has dropped from 30% at the beginning of the epidemic to positive growth in November. The growth rate of global crude steel consumption in November was as high as 8.3%, hitting the highest monthly growth rate since 2017.

Since October last year, China has returned to net steel exports, thanks to the rapid rebound in overseas consumption and the apparent rise in overseas steel prices more than domestic ones.China imported 1.8 million tons of steel billets in September last year and exported 1 million tons in November.It is expected that from January 2021, China's net export of steel billet will be more than 2 million tons, which will significantly ease the pressure on domestic supply.

Thanks to the rapid recovery of the overseas steel smelting industry, overseas pig iron production leveled off in November for the first time this year, rising by 10 million tonnes in April, equivalent to 16 million tonnes of increased iron ore consumption and 4 million tonnes of coke consumption, as well as 5.6 million tonnes of coking coal consumption.This has made China's available steel raw materials more tight, the growth of iron ore imports began to decline, coke export orders, the international coking coal price index soared.

Back in December last year, steel prices experienced a rapid rise and fall.Under the condition of low inventory, due to the toughness and rigidity of domestic steel consumption, as well as the outbreak of overseas replenishment demand, contributed to the rise of steel prices in the first half of December.However, the appropriate compression of profits, stable through the winter, compression of lumber profits is the same issue in the steel industry, so in the second half of December steel prices high down rushed, directly fell into the cost zone.

The tight supply of raw materials will continue

Overall, last December three steel raw materials to maintain a stable rise pattern.Coke still to 10 days as a cycle for the price adjustment, the port spot increased by 350 yuan/ton;Imports of medium volatile hard coking coal rose $18 / ton;The iron ore index rose $44 a tonne.In the case of three major raw material prices rising together, steel production costs continued to rise, the monthly cumulative increase of 420 yuan/ton.Calculated at current price, the cash cost of rebar warehousing has been pushed up to 4200-4300 yuan/ton.

It's going to be a tough winter for the big three steel ingredients.Due to the resumption of global blast furnace production, the shortcoming of iron ore supply side increment is more and more obvious.For the whole year of 2021, the supply gap is large.Coke market, supply contraction is obvious, it takes time for new production capacity to put into production, and consumption continues to increase, the supply gap is still unable to make up for the short-term, especially enterprises have to face the problem of replenishment before the Spring Festival.Coking coal two major sources of import resources continue to not supplement, domestic supply is difficult to volume.Overall, raw material supply will continue to be tight, which will further drive up the cost of the black industry chain.

In January 2021, with the launch of winter storage, the demand for warehouse construction began to start, and the overseas demand was still increasing, a new round of steel price rise began.From the cost analysis, the raw material cost will further drive up the steel price cost, forming a strong support below.