Panorama of steel industry
1. Steel varieties and quality standards. 1) Classification of steel varieties. According to the different carbon content, it can be divided into pig iron and crude steel. The carbon content of pig iron is more than 2%, and white iron is mainly used for steelmaking; The carbon content of crude steel is less than 2.11%, which can be divided into ordinary steel, high-quality steel and high-quality steel according to quality, and carbon steel and special steel according to chemical composition; Steel is further processed from crude steel, mainly including sector and strip, pipe, profile and wire. 2) Steel performance index. The mechanical properties of iron and steel mainly refer to six indexes: yield point, yield strength, tensile strength, elongation, yield ratio and hardness. It measures the hardness, strength, toughness, tensile and elastic limit of iron and steel. It is mainly disturbed by chemical elements. Carbon can improve strength but reduce plasticity and impact, and silicon can improve strength and elastic limit, which is used for deoxidation in steelmaking stage.
2. Steel processing and smelting. According to different steelmaking processes, it can be divided into long process and short process. The long process is divided into three steps: ironmaking, steelmaking and continuous casting. Firstly, iron ore is used as raw material and coke is used as fuel to generate molten iron through blast furnace ironmaking, and then pig iron is used as raw material and scrap steel is used as coolant to generate molten steel through converter steelmaking. After secondary refining, it is cast into billet through continuous casting. The short process does not need ironmaking, but directly takes scrap steel as raw material and smelts it into crude steel through electric arc furnace. Due to the high cost of scrap steel and electricity, China's steelmaking is still dominated by long process, and the scale of short process is small. The operating rate of 247 steel blast furnaces can be tracked to observe the operation and production of steel plants. The billet after continuous casting also needs to be produced into various steels through extrusion, drawing, rolling and other processes. At present, rolling is the main production process, which can be divided into cold rolling and hot rolling according to different temperatures. Cold rolling takes hot-rolled steel coil as raw material, so the price is usually higher than hot rolling.
3. Steel raw materials. 1) Iron ore. ① Distribution of iron ore resources. The global iron ore resources are mainly concentrated in Australia, Brazil, Russia and China, accounting for 28.3%, 18.9%, 13.9% and 11.1% respectively in 2021. Although China is rich in iron ore resources, its taste is low, with an average taste of 34%, significantly lower than 47% of the global level. China's resources are concentrated in Sichuan, Liaoning, Shanxi and Anhui, accounting for more than 50% of the country's iron ore resources. However, iron ore production is concentrated in Hebei, with an output of 400 million tons in 2021, accounting for more than 40% of China's output. Among the main iron ore energy bases, Liaoning AnBen, Sichuan Panxi and Hebei Jidong mining areas are rich in resources but low in taste, generally less than 30%. The average taste of iron ore in ningwulu Zong, Xinjiang Tianshan and Xinjiang West Kunlun mining areas is between 30% - 40%, but the resource reserves are not high. Due to the decentralized distribution of iron ore resources and low taste in China, most steel mills rely on imports. In recent years, the proportion of imported iron ore in the total supply has continued to be more than 50%. Australia and Brazil are the main importers. Since 2015, the proportion of the total iron ore imports of the two countries in the total imports has basically remained at more than 80%. ② Iron ore supply and inventory. Australia and Brazil are the major iron ore suppliers in the world, and their annual output accounts for more than 60% of the global output. They are mainly monopolized by vale, Rio Tinto, BHP Billiton and FMG. The total iron ore output of these four producers in 2021 is 1.08 billion tons, accounting for more than 40% of the global output. The market mainly observes the global supply by tracking the iron ore shipments of Australia, Brazil and four miners. Among them, Australia, Rio Tinto, BHP Billiton and FMG disclosed the iron ore sent to China. The inventory is mainly observed by tracking the national port inventory and the daily average port clearance of iron ore. ③ Transportation and processing of iron ore. The transportation of iron ore is mainly by sea, and the seaborne trade volume is about 1.6 billion tons in 2021. China's iron ore is mainly transported to China's deep-water port from Australia, Western Australia and Brazil. Brazil is far away and the freight rate is usually 2-3 times that of Australia. The freight rate of iron ore from Brazil to Qingdao and from Western Australia to Qingdao can be tracked to observe the freight level. Iron ore is mainly transported to China's Qingdao Port International Co.Ltd(601298) , Tianjin Port Co.Ltd(600717) , Beilun port and other large deep-water ports. The arrival volume of iron ore in the six northern ports can be tracked to observe the future supply of iron ore. After the iron ore arrives at the port, it needs to be transported to the iron and steel enterprises. There are three main modes of transportation: three-way transportation, load reduction transportation and river sea direct transportation. Basically, it needs to be transported by inland river to Shanghai port, Zhenjiang port and other jiangnei ports. The freight index of several major ports to jiangnei port can be observed. There are great differences in iron ore prices due to differences in iron ore importing countries, transportation distances and transportation modes. The market mainly observes the Platts iron ore price index and the dry basis tax price of Tangshan Iron Concentrate powder. 2) Coke. Coke is mainly made from coking coal. China's coking coal is scarce and needs to be imported. However, coke is mainly made by China itself. In 2021, China's coke output was 460 million tons and the import was only 1.332 million tons. Coke supply and price are mainly affected by coking coal. In addition to the import and output of coking coal, the market mainly observes the coke supply by tracking the inventory of coking coal and coke in steel plants and coking plants. The price mainly focuses on the price increase of Shanxi main coking coal warehouse in Jingtang Port and the tax included site price of secondary metallurgical coke in Tangshan.
Steel supply and demand and inventory
1. Supply. China is a major producer of iron and steel. In recent years, the annual output of pig iron and crude steel has continued to account for more than 50% of the world, with 870 million tons and 1.34 billion tons respectively in 2021. The output of steel in 2021 is 1.34 billion tons, and the total output of reinforcement, wire rod, hot rolled coil, cold rolled sheet and medium and heavy sector is about 700 million tons, accounting for more than 50% of steel production. China's iron and steel is mainly self smelting, with a small number of imports, and the production is concentrated in Hebei. In 2021, the output of pig iron, crude steel and steel accounted for about 22% of the country, followed by Jiangsu, accounting for about 11%.
2. Inventory. Steel inventory usually refers to the inventory of five steel products: deformed steel bar, wire rod, hot rolled coil, cold rolled coil and medium and heavy sector, focusing on the inventory of steel mills and social inventory. Steel mill inventory refers to the inventory reserved by steel mills, which mainly reflects the supply side, usually lags behind the demand, with obvious seasonality. The inventory accumulates before the Spring Festival and drops rapidly after the festival. The main indicators of concern are the inventory of member manufacturers counted by China Steel Association. Social inventory refers to the inventory in the hands of traders, which can reflect the supply and demand of the steel market. There is also an obvious seasonality. The inventory before and in summer is high, and the inventory after the Spring Festival and in the fourth quarter is removed. The market mainly tracks the social inventory of five products in 35 cities disclosed by Mysteel.
3. Demand. In 2021, the apparent consumption of steel will reach 1.08 billion tons, the apparent consumption of five major products will reach 510 million tons, and the apparent consumption of deformed steel will reach 250 million tons. China's steel products are mainly sold domestically and exported less. In 2021, the export volume accounted for about 5% of the annual output. From the perspective of terminal industry, steel is mainly used in construction, machinery, automobile, household appliances and other fields, and more than 50% of steel is used in construction. Construction steel is mainly rebar and wire rod, accounting for about 70% of construction steel consumption. It is specifically invested in real estate and infrastructure. The amount of real estate steel is usually twice that of infrastructure steel. The change of real estate steel demand can be observed by tracking the growth rate of real estate investment and construction area. In terms of capital construction, the demand for steel for capital construction can be observed through the growth rate of capital construction investment, the signing of capital construction contracts by major construction central enterprises and the sales volume of excavators. In addition to steel for automobile and household appliances, steel for construction also accounts for about 22%. Mechanical steel is mainly sector, which produces agricultural machinery, machine tools and other products; The steel for household appliances is mainly ordinary cold-rolled sheet, hot-dip galvanized sheet, etc., and produces white appliances such as refrigerators and washing machines; There are many kinds of automotive steel, including steel pipes, steel sectors and various profiles, which are used to produce doors, bumpers, floors and other parts. The demand for these kinds of steel can be observed by tracking the output of heavy machinery, the production and sales of white appliances and automobiles.
Risk tip: the price of raw materials such as iron ore and coke is higher than expected, and the downstream demand is lower than expected.
