Cold rolled coil market Review in 2022 and Prospect in 2023 in Shanghai Market

Cold rolled coil market Review in 2022 and Prospect in 2023 in Shanghai Market

Overview: As previously said, with the release of the domestic epidemic control policy and the entry of the traditional off-season of consumption, the cold-rolled sheet coil in Shanghai played a game between the strong expectation and the weak reality in the whole December, the raw material performance was strong and the cost support was strong, and the whole showed a state of range fluctuation. However, the negative feedback of the release of epidemic control has gradually emerged. Due to the infection of a large number of workers in the industrial chain, the operating rate of upstream steel mills has decreased. In the downstream manufacturing enterprises, many of them planned to take an early holiday in January, and caught up with the progress in December in advance, leading to some consumption in advance. This is also the main reason why the consumption in early December was not bad, while the consumption in late December was poor. As 2022 enters the final stage and the New Year is coming, what will be the trend of Shanghai cold rolled sheet rolling in 2023? History will not repeat itself, but it will be strikingly similar. We can only learn from history and review the past. The following is a fundamental review of the Shanghai cold-rolled coil market in 2022 and its outlook for 2023.

I. Review of cold rolled coil price trend in Shanghai market in 2022

In 2022, the trend of cold rolled sheet in Shanghai showed that the price was high before and then low. The price fell sharply from June to July, and the center of gravity of the annual average price moved down. Specifically, the price trend of cold rolled coil in Shanghai in the first quarter of 2022 is mainly as follows: the price fell before the Spring Festival, and the price rebounded after the Spring Festival. Before the Spring Festival, close to the holiday terminal downstream gradually shut down for a holiday, the market gradually closed, mainly driven by the decline in demand cold rolled coil price callback decline. After the Spring Festival, the price rise of cold rolled coil is mainly due to the price rise of hot coil raw materials, and the strong cost support makes cold rolling rise passively. The price trend of cold rolled coil in Shanghai in the second quarter of 2022 is mainly as follows: after the price climbed to the peak in April, and the high price remained sideways for a month. The main reason is that the cold rolled coil is in the peak season of consumption in April, and the price of the cold rolled coil in the country rises due to the recovery of consumption. However, the Shanghai market in April was affected by the epidemic, the market was closed, and there was almost no transaction. As a result, the price of cold rolled coil in the Shanghai market in April was high and horizontal and lower than the national average price. In May, the price slowly decreased by 190 yuan/ton month-on-month, and in June, the price fell sharply by 560 yuan/ton month-on-month. After entering May, the production of downstream enterprises, especially the automobile industry, was affected by the epidemic, and its negative feedback to the consumption of cold rolling was gradually emerging. At this time, the average price of cold rolled coil across the country was also slowly declining. However, Shanghai gradually implemented the resumption of production and production, and the market began to have a small amount of resource circulation. The price difference between the cold-rolled coil price in Shanghai market and the average price of cold-rolled coil in the whole country showed a trend of gradually narrowing in May. The impact of the epidemic on the price trend of cold rolled coil in the Shanghai market from April to May is a double-edged sword, because the market shutdown caused the increase of cold rolled coil in the Shanghai market in April to fall behind the national average price, and also resulted in the decline of May to fall behind the national average price. Shanghai market in June fully unsealed, resources can normal circulation, but cold rolled sheet roll out of a "continuous decline" market. The main reason is: after the release of the lockdown in June, the actual weak consumption has been effectively verified. However, the recovery of consumption in Shanghai market is just a flash in the pan, and the large-scale rush to work phenomenon that the market expected has not appeared. After the end of the epidemic, with the coming of the off-season of consumption, the accumulated contradiction between supply and demand has not been significantly improved. Invisible stockpiles that were previously in transit due to the pandemic are also gradually becoming available. This is also the June cold rolled roll price fell sharply, and the decline is greater than May important reason. In the third and fourth quarters of 2022, the price of cold rolled coil in Shanghai stopped falling and rose. The main reason is: due to the imbalance of supply and demand in the pattern of steel mill profits upside down, since August into the plate production cut overhaul more, relieve the supply pressure on the market. After September, with the arrival of the traditional peak season of consumption, the continuous inventory reduction, the contradiction between supply and demand in the market has been effectively alleviated. During the period, the steel mill profit was repaired and orders were improved, and the steel mill industry also increased after entering September.

Ii. Review of the supply side in 2022 and estimate in 2023

On December 22, according to Mysteel monitoring 29 cold-rolled coil production enterprises, the operating rate of this week was 78.72%, week on week reduced by 4.26; The capacity utilization rate of the steel mill was 77.54%, which decreased by 3.60% week on week. The actual weekly output of the steel plant was 784,900 tons, which decreased by 36,400 tons week on week. Steel mill inventory of 373,200 tons, down 10,300 tons week on week. According to feedback, steel mills received orders in December is relatively good, the important reason for this week's decline in production is because of the impact of the epidemic steel mill staff fewer, the overall operating rate has declined. It is not difficult to see from the figure above that the overall output of cold-rolled coil in 2022 presents a "V" shape. Specifically, production in the first quarter of 2022 was lower year-on-year, mainly due to production restrictions for the Winter Olympics earlier in the year. In August 2022, the production decreased significantly, the main reason is that the steel mill profit is inverted under the imbalance between supply and demand, and the steel mill actively reduced production to alleviate the contradiction between supply and demand in the market. After September 2022, the contradictions in the market were effectively alleviated due to the profit recovery of steel mills, and steel mills received orders fairly well. In 2021, the output of cold rolled coil was suppressed by the winter production limit at the supply end. However, there is no winter production restriction policy in 2022, so after September 2022, cold-rolled coil production gradually rebounded month-on-month, but increased significantly year-on-year.

By the end of 2022, the latest production capacity of sample cold rolling enterprises in China is 167 million tons, with 299 production lines in total. According to the regional division, East China and North China account for the largest proportion of 33.74% and 30.59% of the national production capacity distribution respectively. In 2023, it is expected to add 5 new equipment, with an additional capacity of 2.9 million tons; The number of eliminated equipment 1, eliminated capacity of 600,000 tons. Total annual capacity is expected to reach 169 million tons. This means that there is no shortage of cold-rolled coil capacity in 2023, but it will still be a state of repeated dynamic adjustment of capacity utilization and dynamic control of output.

In December 22, Japan net all warehouses in Shanghai cold rolled 664,000 tons, week on week reduction of 15,500 tons. The annual increase in the public sector was 15,000 tons and the annual increase in the lunar calendar was 25,500 tons. In 2022, the overall cold rolled inventory in Shanghai presents a state of low at both ends and high in the middle, and the overall high inventory runs throughout the year.

Iii. Review of demand end in 2022 and forecast in 2023

The main consumption industries of cold rolled sheet coil are automobile field, home appliance field and hardware door industry, and the total consumption of other downstream industries is relatively low. This year, the automobile industry showed a relatively bright year-on-year growth trend, while the household appliances industry was affected by the negative feedback of the real estate industry recession, consumption is down.

Automobile sector: According to the data of the National Bureau of Statistics, the automobile production from January to November in 2022 was 25 million, with a year-on-year growth of 6%. The production of new energy vehicles was 6.35 million, with a growth of 101% and a penetration rate of 25%. Automobile production in November was 2.42 million units, down 10% year on year; 760,000 new energy vehicles were produced, a year-on-year increase of 61 percent and a penetration rate of 31.2 percent, which is a very high growth. After the lifting of the lockdown in Shanghai, a series of stimulus policies have been introduced this year, especially a package of favorable policies for the automobile industry to promote consumption and stabilize growth, which has played a strong role in promoting the steady growth of the automobile industry. From the policy effect in June to November, the effect of promoting automobile consumption is evident. But the marginal gains from the policy stimulus are diminishing this year as consumer incomes and confidence fall, high oil prices, high dealer inventories and the pandemic take their toll. According to data released by the National Bureau of Statistics, the country's passenger car market ran relatively hard in November, with production and exports both declining and domestic retail sales severely depressed. According to our statistics and calculation, at the end of November, the national passenger car inventory was 3.94 million, of which 920,000 were stored by manufacturers and 3.02 million were stored by channels. Vendor inventories accounted for 23%, up 6 percentage points from the end of November. Automobile consumption is expected to continue to decline in December on a month-on-month and year-on-year basis, but it will still maintain positive growth for the whole of 2022.

Looking ahead to 2023, the author predicts that the auto industry will maintain positive growth despite this year's high base. With the conclusion of the 20th National Congress of the Communist Party of China, the direction of stabilizing economic growth and expanding domestic demand has been set. With the release of the epidemic, the gradual recovery of consumer confidence and income, and the large space for growth of new energy vehicles in China, the consumption of the automobile industry will still be worth looking forward to.

Home appliances: According to the National Bureau of Statistics, China's air conditioning output in October 2022 was 14.432 million units, down 3.3% year on year; The cumulative output from January to October was 189.595 million units, up 3.2 percent year on year. China's refrigerator output in October was 6.90.0 million units, down 9.7% year on year; Cumulative output from January to October was 71.59 million units, down 3.3 percent year on year. The output of washing machines in October was 8.806 million units, up 12.9% year on year; Cumulative output from January to October was 73.18 million units, up 3.7 percent year on year. The output of color TV sets in October was 19.262 million units, up by 8.2% year on year. The cumulative output from January to October was 161.396 million units, up 9.1% year on year. According to the latest data from the General Administration of Customs, China exported 2.25 million air conditioners in November 2022, down 12.8 percent year on year. Cumulative exports from January to November totaled 42.73 million units, down 12.2 percent year-on-year. The export of refrigerators in November was 3.56 million units, down 37.4% year on year; Cumulative exports from January to November totaled 51.46 million units, down 21.7 percent year-on-year. In November, 1.93 million washing machines were exported, up 1.8 percent year on year; Cumulative exports from January to November totaled 18.83 million units, down 7.1 percent year-on-year. The export of LCD TVS in November was 7.64 million units, up 1.8% year on year; From January to November, total exports reached 84.67 million units, up 11.8 percent year on year. In November, the import of LCD TV 30000 units, down 17.8% year-on-year; Cumulative imports from January to November totaled 360,000 units, down 13.1 percent year on year. In 2022, the overall consumption of domestic household appliances industry showed negative growth, especially the decline in exports. Domestically, although the Chinese government has introduced a series of policies to stimulate the consumption of domestic household appliances this year, the per capita quantity of domestic household appliances has been high because of the depression of the real estate industry. Domestic consumption is resilient, but it is difficult to increase. In terms of export, due to the impact of the epidemic on the foreign supply chain in 2021, coupled with the issuance of a large number of consumer coupons, the demand for foreign home appliances surged, and China's export increased substantially, resulting in a high export base of the home appliance industry last year. In 2022, the Federal Reserve will raise interest rates in foreign markets and monetary tightening will continue. Coupled with high inflation in Europe and the United States and high energy prices, the enthusiasm of consumers in foreign markets will be sharply reduced.

Looking ahead to 2023, the author predicts that the consumption of household appliances industry will still show a negative growth trend. First of all, the per capita ownership of the four big domestic electricity is relatively high, the negative feedback of the sluggish real estate industry will still gradually emerge, and the increase of domestic consumption is difficult. In terms of exports, although inflation in Europe and the United States will peak and fall in 2023, the pace of interest rate hike by the Federal Reserve may slow down, but the European and American economy may show a trend of recession, which will restrain the consumption of household appliances in Europe and the United States.

Fourth, 2023 price forecast

Macroscopically: The 20th National Congress of the Communist Party of China has concluded, and the direction of steady economic growth, domestic demand and consumption has been set. Coupled with the release of the epidemic, consumer confidence and income gradually recovered as the peak of infection passed. The Chinese economy may be the first to enter the stage of recovery. Internationally, the target range for the federal funds rate rose to 4.25 percent to 4.5 percent, the highest since December 2007, but in line with market expectations. Overall, the US November CPI relayed the October CPI decline signal, giving inflation turning point more solid data support. As inflation fell, the Fed began to take more of the initiative to fight the recession. Even if financial risks emerge next year, the Fed may have room to cut interest rates to prop up markets without worrying too much about a rebound in inflation.

In terms of cost, the current iron ore and coke performance is relatively strong, the current steel mill is still in a state of loss, the cost of cold rolled coil support is strong. With the passing of winter, the international market of carbon demand is the most tense time in the past, 2023 carbon supply may be loose, coking coal prices still have room to fall.

Looking forward to 2023, the author predicts that the trend of cold rolled sheet and coil price in Shanghai will show "M" shape, and high before low. First of all, there is no shortage of steel production capacity on the supply side in 2023. It will still be a state of repeated dynamic adjustment of capacity utilization and dynamic control of output. In terms of demand, the overall bright spot of industry consumption in 2023 is still insufficient. It is expected that the annual consumption of cold rolled sheet and coil will be maintained year-on-year. In terms of cost, compared with 2022, the high price of coke operation may fall year-on-year, which further weakens the cost support of cold rolled coil.