Steel price forecast of 2021: firm bottom, bullish average price, but limited high

Macro aspect

Recent economic data show that China's national economy continues to recover.Retail sales grew 5 percent in November from a year earlier, 0.7 percentage points faster than the previous month.Investment has further improved. From January to November, fixed asset investment grew by 2.6% on a year-on-year basis, 0.8 percentage points faster than that from January to October.The manufacturing PMI came in at 52.1 per cent and the non-manufacturing business activity index at 56.4 per cent, both new highs for the year.It is worth noting that in 2020, despite the sharp appreciation of RMB, China's exports continued to increase sharply. In terms of US dollars, in November, Both the total value of China's foreign trade and the value of China's exports recorded the highest monthly record since statistics began in 1979, and the growth rate of China's exports also reached the highest level since February 2018.

Cost analysis

As of December 30, the profit space of 20mm third-class rebar in domestic small and medium-sized steel enterprises is RMB 448 / ton, increasing by RMB 152 / ton compared with the end of last month (RMB 296).The profit space of 8-10mm high line is + 494 YUAN/ton, which is a positive increase of 185 yuan/ton from last month (+ 309).At the beginning of the month, the financial pressure relieved, stacking pre-holiday part stock demand, the market mood improved, but considering the construction site gradually stop, the release of demand is limited, the inventory to meet the inflection point, and the market fear of high sentiment is still there, it is expected next month steel price overall shock weak adjustment, small and medium-sized steel enterprises profit space or small drop.

Downstream demand

Infrastructure construction: According to the latest data from the Ministry of Transport, completed fixed assets investment in Transportation increased by 3.99% year on year in November, 1.04 percentage points slower than the previous month.Month-on-month decline of 7.07%, 3.92 percentage points more than the previous month.In addition, according to the statistics Bureau, from January to November, urban fixed asset investment grew by 2.6% on a year-on-year basis, 0.8 percentage points higher than that from January to October. Among them, infrastructure investment grew by 1.0% on a year-on-year basis, 0.3 percentage points higher than that from January to October.In 2021, in the context of domestic demand expansion strategy, it is expected to complete the annual fixed asset investment in transportation of about 2.4 trillion yuan, the investment in new infrastructure and manufacturing industry will be further increased, and the demand for infrastructure-related steel still has the potential to grow. In January, the consumption of related wire screws will continue to weaken.

Real estate: According to the latest data from the Statistics Bureau, investment in real estate development increased by 6.8 percent year-on-year in the january-November period, 0.5 percentage points higher than that in the January-October period.The area under construction by real estate developers increased by 3.2% year on year, 0.2 percentage points higher than that in The january-October period.The area of commercial housing sales grew by 1.3% year on year, 1.3 percentage points higher than in the first ten months of this year.In November, the real estate development prosperity index was 100.55, 0.05 points higher than that of October.From January to November, the land purchased by real estate developers fell by 5.2% compared to the same period last year, an increase of 1.9 percentage points over the period from January to October.In December, the national key monitoring of 67 cities of new and second-hand housing online prices have achieved a month-on-month increase.It is expected that the overall real estate regulation in 2021 will remain continuous and stable, the real estate market will remain stable in the short term, and the demand for relevant building materials will remain weak in the off-season.

Market outlook

The global economy is expected to be restorative growth in 2021, the Chinese economy will enter a new stage of development, "difference" start to drive the high growth regression, "binary" structure to achieve internal and external economic double promotion, the fundamentals of good period, remaining at the bottom of the support, steel prices or overall high level this year, there will be 5-10% rise in the average price.Considering the expectation of high inventory and high output, steel price has a big resistance to surging again. Especially after the good digestion in the first half year of 2021, the output in autumn and winter may hit a new high, and the fluctuation space in the second half year will be further increased.