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Analysis of the impact of global bailout on China's steel price trend
The uncompromising steel market in winter is not only freezing steel mills and steel traders, but also cooling the confidence and enthusiasm of the industry. Before the end of the year, the steel market really "squeezed" like this? This year's "winter storage" is really just a legend? The steel market can create a miracle? The author warmed up from the expectations of the policy, briefly analyzed the steel market before the year. The policy is warming The European Central Bank announced a rate cut of 25 basis points on Thursday, reducing the core lending rate from 1.25% to 1%, which is the bank's second rate cut during the year. The European Central Bank cut interest rates twice, which is equivalent to erasing the two interest rate hikes in the first half of the year, and returning to the previous loose state, so the expectation of increasing global liquidity is becoming a reality. On the Chinese side, economic data released on the 9th showed that the decline in CPI and PPI exceeded the expectations of previous experts and institutions. In view of the easing of global monetary policy, the rise of domestic economic downturns, and the easing of inflationary pressures, it is expected that China’s monetary and fiscal policies will “step on the gasâ€, especially monetary policy, which may be a recent event. Therefore, the entire policy should be warmer, but the policy has not yet been introduced. Although it is certain that policy easing may not be inclined to the steel market and downstream demand, policy relaxation can at least boost the steel market, especially to increase market confidence. In short, the improvement of the entire environment, even if the steel market can not directly benefit, will get more or less "benefit". The fundamentals are difficult to improve. The author believes that if the steel market wants to create a miracle, it is far from enough to just continue to benefit from the policy. In order to "break the ice", fundamental improvements are needed, and in the short term, it is expected that the fundamentals will not change much. First of all, the steel mills will not cut production. In October, more than one-third of domestic large steel companies suffered losses. However, according to the author's understanding, the steel mills did not reduce production. China Steel Association estimated that the national crude steel output in the second half of November was 1,685,200 tons, an increase of 1.29% from the previous month. The rebound in crude steel production and the death of steel mills are bound to lead to inventory pressure. Secondly, steel traders can only go out. At present, at least 80% of the steel traders in the country are in a state of loss. Not only does the willingness of the “winter storage†fall to a low point, but traders are also forced to sell money by losing money. Steel trade companies prefer low-inventory or zero-inventory winters, and they are not willing to take the risk of "continuing to buy and sell lost money next year." In this way, the steel mills will not cut production, and the traders will also sell their losses. Under the influence of the cold winter, the sluggish demand and the pessimistic attitude of the merchants, it may mean that steel prices may fall again. Again, it is a foregone conclusion that demand will not go. As the year approaches, the steel market enters the traditional off-season. Due to weather, the construction of the site has slowed down. Most projects have entered the final stage, and the new construction has been gradually reduced. The downstream demand will be lighter and the demand will gradually shrink. Finally, the funding pressure is obvious. 2011 is destined to be a very tragic year for the steel market, and it is a tangled year. In the first half of the year, due to the continuous improvement of the deposit rate and interest rate hike by the central bank, there was a rare tension in the pressure on steel traders. Although the funding pressure has eased in the second half of the year, it will not solve the "hunger and thirst" of the steel market. Due to the pressure of repayment at the end of the year, traders have to choose to continue to ship in large quantities, and the vicious competition of prices is inevitable. At the same time, the pressure on capital is also an important factor for many steel traders to abandon the winter storage. On the whole, although the policy is expected to warm up, it is difficult to weaken the fundamentals of the steel market. Demand seems to be more and more bearish. In the past years, the winter storage demand of traders must be greatly reduced this year. It is unlikely that steel mills will cut production. Most merchants believe that because the market is temporarily unclear, today's businesses generally hold the mentality of being able to come out, and grasp the current timing of sales. Before the end of the year, it was difficult for the steel market to create a miracle. The growing European and American debt crisis has caused fears of a more serious recession in the world economy. The global collective “saving the market†will become the most important factor affecting the future steel and its raw materials market. Due to the lack of other effective means, the side effects of the liquidity after the "bailout" will inevitably push the price of steel and its raw materials to a new high. This is the necessary cost and cost to avoid falling into an economic crisis. China needs to respond correctly. First, the threat of a more serious recession has once again triggered the global "saving of the market". The current "two debt crisis", especially the European debt crisis, has intensified, making the world economy more serious and the risk of recession is increasing. This is mainly reflected in two aspects: First, the danger that some countries are not yet in debt. For example, Greece, Spain, Italy and other countries. They have too much debt, far beyond repayment ability, and must constantly borrow more new debts to pay off old debts and pay high interest rates. Moreover, due to the continuous downward adjustment of the above-mentioned national debt rating, its subsequent loans have become more and more difficult, and “hard debt default†is only a matter of time. If these countries do not pay debts, their risk spillover will inevitably lead to a major impact on the euro zone financial system and the world financial system. The worst situation will be the disintegration of the euro zone, including the euro becoming "waste paper", which must be a major disaster for the world economy. Second is the danger of excessive consumer contraction. Some countries, although not theoretically not yet in debt, such as the United States; other countries, although the fiscal deficit and debt balance have not reached the most dangerous level, such as the United Kingdom, France, etc., but the common point is to tighten spending, Increase the collection. Consumers and the government are tightening their money bags, which has led to a serious suppression of spending power. Consumption is the engine of economic growth, and the excessive contraction of consumption will also cause economic growth to lose momentum. The most terrifying thing is that in the future, the world economy will face the possibility that the above two dangers will come together and the effect multiplier will be superimposed. If left unchecked, a vicious circle that appears in front of people may be worse than a more serious recession—an unprecedented economic depression, a global social unrest. Although this worst situation has not yet occurred, it does not necessarily happen, but its panic expectations are real and dominate the actual behavior of producers and investors. This is why, for a period of time, domestic and foreign capital markets and commodity markets have been overshadowed and the market has been sluggish; some countries, including developed countries, have been demonstrating constant and important factors. To this end, international authorities have frequently issued warnings: the risk of another recession in the global economy will increase, and 2012 will be a crucial year for the world economy to continue to grow at a low rate or to fall back into recession. The worse result has not yet arrived, and the situation is very serious. And believe that some countries' existing economic policies and stimulus measures are insufficient to effectively deal with the downside risks of the economy. Call on countries around the world to take further stimulus measures. In order to avoid this kind of disaster situation, all countries in the world must join hands to "save the market." Even if you pay a high price for this, you will not hesitate to lose money. Recently, the Fed and other major Western central banks have taken joint actions to comprehensively reduce the interest rate of commercial banks to borrow dollars. This is the determination. Second, the Chinese economy cannot be immune to its current global economic situation. If a serious recession really occurs, China certainly cannot be immune to it. In addition to the world economic recession will seriously impact China's export trade, but also the domestic demand trend is not ideal. The newly released China Purchasing Managers' Index (PMI) and non-manufacturing index have already entered below the 50-point line; at the same time, due to the terrible real estate sales in more than a year and the deep fall in residential prices, it will lead to In the future, the construction construction will shrink sharply, and the Chinese construction industry will also suffer a heavy blow. In China's four major customs industries: manufacturing, construction, services and export industry trends are not optimistic, if the decision-making departments continue to adhere to the tightening policy, China's economic "hard landing" situation will be difficult to avoid, that is, economic growth Falling below 7%, the capital market is in a slump, businesses are closing down, and unemployment is increasing. This is not sensational. Therefore, although China's economic growth rate is still enviable at this stage, it should not be taken lightly. It is necessary to adopt forward-looking stimulus measures to prevent economic growth from “drought and droughtâ€. Third, the printing press became the main means of global "saving the city" The global "collective rescue road map" should be the right medicine to eliminate the above two major risks that cause a more serious recession in the world economy. It is imperative to solve the problem that some countries are not yet in debt. For example, Greece, Italy and other countries, to avoid a hard debt default, the risk spread to the core countries, especially to prevent the collapse of the euro zone. The second is to avoid excessive consumption and too fast consumption. Although the high welfare policies of Western countries cannot be sustained and reforms are needed, their adjustments will take a long period of time and cannot be achieved overnight. In other words, the increase in revenue and expenditure can not excessively impact normal consumption. Otherwise, it will not only trigger strong national protests, social unrest, economic growth loses a stable foundation; it also lies in the fact that some countries owe too much debt, even if all the income is used to pay off debts, it will take several years, and economic growth cannot wait for several years. after that. Only by resolving these two major problems can we avoid a more serious recession in the world economy, even an unprecedented Great Depression. Under the current conditions, the final solution of these problems, in addition to the printing press, continue to print banknotes, there is no other more effective means. On the one hand, printing money can solve the problem of borrowing new debts and repaying old debts in some countries in Europe and the United States, avoiding hard debt defaults and delaying other core countries, leading to the collapse of the entire system. On the other hand, payment methods can also be obtained to reduce the tightening of expenditures and to protect the consumption expenditures necessary for economic growth, including government expenditures and personal expenses. Of course, solving the problem of sovereign debt crisis in some countries and solving the problem of liquidity shortages in some financial institutions can also be solved by issuing more bonds to financial surplus countries and multinational corporations. But the problem is that these countries have huge fiscal deficits and debt balances, and the prospects for government bonds are negative, lacking investment guarantees. Affected by this, emerging economies and multinational companies are reluctant to invest in bonds. The Fed also said that it would not help the euro zone debt problem. This is the main reason why no country at the G20 summit promised to directly invest in European financial stability institutions. Therefore, the European debt crisis was resolved, and ultimately it relied on Europe itself, mainly the European Central Bank to buy bonds to solve. Unlike the euro zone countries, the Fed can rely on the dollar hegemony that still exists today, and through the way the Fed buys national bonds, it starts the printing press to solve the funding problem. And this is also the plan that the US government is most willing to implement. It can be seen that the settlement of the debt crisis in Europe and the United States, in addition to relying on the central bank to purchase government bonds, continues to inject liquidity into the market, and there is no other way out. According to this prediction, in the future, the Fed will not only launch QE3, but will even launch QE4 and QE5 until the economy re-enters growth and the unemployment rate reaches a reasonable level. The European Central Bank’s purchase of European bonds will also be the final solution to the debt problems of European countries. Although this will be subject to numerous criticisms and objections. For example, the core countries of the euro zone, Germany and the United Kingdom, have opposed the use of the European Central Bank as a final solution, and even against the European bonds themselves; the Fed has different views on the new quantitative loose monetary policy. However, in the face of the collapse of the euro zone, the more serious recession of the US economy, and the threat of the global Great Depression, the "two evils will be taken lightly" will be compromised. Fourth, the results of printing money continue to push up the price of steel and its raw materials. The world's major economies started the printing press together. Of course, the liquidity entered the market in large quantities, diluting the existing material wealth and pushing up the price of bulk commodities. In the medium and long term, global commodity prices continue to operate at high levels. The international market for oil, metals, ore and other market trends are still fluctuating upwards, and have crossed the previous highs. For example, oil prices will exceed 150 US dollars per barrel, and iron ore prices will reach 200 US dollars / ton. We are on the eve of serious global inflation. V. How should China respond? How to deal with the complicated and volatile market situation in the future? 1. Expand domestic demand and guard against the worst situation that may come. No matter how the European and American debt crisis is resolved, China will encounter an external operating environment that is deteriorating. It may also encounter the unexpected slowdown in the domestic industry, the manufacturing industry and the construction industry. It is expected that China’s internal and external demand will be especially in the first half of 2012. The situation of foreign trade exports is even more severe. To this end, a series of measures must be taken to increase domestic demand and prevent the worst economic situation that may come. Efforts to expand domestic demand and respond to the deterioration of the export situation, China still has a lot of room. One of the important aspects is to vigorously strengthen environmental protection construction and provide a better space for people's livelihood and economic growth. For a long time, we have placed too much emphasis on production and construction, and paid insufficient attention to environmental protection, leaving a huge historical debt. In this case, the urban and rural residents are very dissatisfied, and the international evaluation is also very bad. To face this most demanding demand, invest several trillions of dollars in environmental protection construction, and gradually make China's air, land and water resources quality reach the world's advanced level, and at the same time create a strong environmental protection equipment industry, providing millions of dollars. Ten million jobs. Think of it as a new growth point for the Chinese economy. 2. Raise the tolerance for price increases and adhere to the primary goal of ensuring growth. It is now clear that the biggest threats to the world are not inflation, but a more serious recession, even an unprecedented economic depression. "The two evils are taken lightly," and maintaining growth has become a global consensus. Moreover, the current rise in China's price is more due to the structural cost increase caused by economic imbalances. It has a long-term upward trend. It is by no means a solution to our unilateral tightening demand, but it will lead to more and more serious problems. Therefore, it is necessary to proceed from reality and improve the tolerance of China's price rise for a period of time. It is necessary to return the primary goal of macroeconomic regulation and control to "guarantee growth", while taking into account the problem of excessive price increases. It should be pointed out that at present, only the fine adjustment of monetary policy is insufficient, and it is difficult to dispel the panic and sorrow, and to reverse the lack of confidence of producers and investors. Therefore, it is necessary to improve the policy easing. For example, further reduce the deposit reserve ratio, reduce the loan interest rate, encourage the first suite and improved housing demand, and carry out large-scale environmental protection construction. 3. Make good use of foreign exchange reserves and do everything possible to obtain more resources. In the future, it is still an era of "resources are kings". It is an era in which resources cannot be copied and banknotes can be printed in large quantities. In the international market, the prices of commodities such as iron ore and metals have fallen in the short term, which will not change the trend of long-term tight prices. This is also an important reason why the US government has relied on powerful military power, has suffered huge consumption, and even sacrificed bloodshed costs, but also acquired oil resources and controlled transportation channels. Under such circumstances, it is imperative to talk about the turning point of the iron ore market, and wishfully gamble on the so-called feng shui turn. Therefore, relevant Chinese departments and steel companies must formulate a long-term strategy for global resource allocation. With the help of the existing $3 trillion in foreign exchange reserves, we will do everything possible to go out and purchase as much commodity resources as possible, including resource rights and resource products. This is also an important way to realize the diversification, materialization, capitalization and equity of China's foreign exchange reserves and avoid serious value losses.