Domestic Demand Drives Construction Steel To Take The Lead
At present, the government has taken various measures to expand investment and promote consumption so as to maintain stable and rapid economic growth. The focus of policy efforts is to increase investment in railway highways, rural infrastructure and affordable housing. This undoubtedly provides support for the demand for construction steel which accounts for more than 50% of the total steel.
In this round of economic adjustment, the price performance of long timber varieties should be relatively stable. Since the second half of 2008, the prices of all kinds of steel products have been substantially adjusted, while the long timber varieties first hit the bottom, reaching a low level in October last year, and then levelling off at the low level, while the price of the plate has sharply changed during the same period, and the index has dropped nearly 11%.
At the end of November last year, the price of timber began to rise steadily after reaching a historical low. At the beginning of February this year, the price of long timber continued to rise to the level of October last year, rebounding 5.6% compared with the lowest level. Despite the slight adjustment in recent years, the price trend is still basically stable, and the average price of rebar varieties is now 3800 yuan.
Prices remain stable behind demand support production expansion. Steel production in October last year, after a historic low, the output of long timber varieties began to rise steadily. In December 2008, the monthly output of wire rod, bar and reinforcement was 7 million 390 thousand tons, 3 million 500 thousand tons and 9 million 630 thousand tons respectively, representing an increase of 23%, 22% and 14% from the previous month. It is estimated that in the 1 quarter of 2009, the peak season of seasonal construction starts and the state financial investment exceeding 100 billion yuan will enter into the implementation stage at the end of last year, which will continue to support the production and sales of long timber.
Over 4 trillion of the government's investment plan will maintain the long-term demand of long timber varieties. In the current round of investment stimulus plan, the policy investment expenditure will be 1 trillion and 180 billion yuan in the next two years, which will lead to social investment of 2 trillion and 280 billion yuan, and the total investment will be close to 4 trillion yuan. Maybe the government's investment expenditure will be 600 billion yuan this year.
According to our investment in railway, highway, power grid and pipeline construction, these measures will drive the consumption of 40 million to 50 million tons of steel in the next 2-3 years. It is estimated that the demand for steel will increase by about 12 million tons in 2009. In addition, the national development and Reform Commission and the Sichuan provincial development and Reform Commission predict that more than 37 million tons of steel will be needed after Sichuan's reconstruction. If completed in 3 years, only 12 million tons of new steel will be needed after the disaster reconstruction every year. In these investment plans, the demand for construction steel is the largest, and its growth offset the decrease in demand for construction steel due to the sluggish property market, which may make construction steel demand remain high in the next 2-3 years.
In the listed companies, enterprises with relatively large construction steel can obviously benefit from the economic stimulus plan of expanding investment and stimulating domestic demand. Among them, Bayi Iron and steel, Fujian steel and Tanggang are both the core competitiveness of the construction of steel production enterprises in the region, the proportion of construction steel reached 87%, 67% and 46%, the future development prospects are worth looking forward to; Ma steel has more than 57% of the long timber products, of which the wheel products have strong competitiveness, will also benefit from this infrastructure investment; and Linggang, Laiwu Steel shares, Anyang shares also have nearly 50% of construction steel products, investment potential is also worthy of attention.
Editor in chief: Xu Qiyun
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