Let’s put it this way, the sharp rise in iron ore will give people the illusion that the raw material costs of steel companies have increased significantly, and the profits of steel mills will be greatly reduced, or even losses. In fact, life for steel companies is still very good.
In normal business operations, if you make a loss, will you still produce in large quantities? I don't think normal companies would do this. Take a look at cotton textile companies. It’s entering the off-season for consumption and if they don’t make money, they can just limit production or just go on holiday. Domestic steel companies' profits per ton of steel have only declined, and steel production has also increased significantly.
In the context of substantial growth in steel production, the tight supply of iron ore has led to an increase in the status of the iron ore industry chain, thereby significantly eroding steel profit margins . Overall, under the situation of weak steel and strong raw materials, the position of the steel industry chain has weakened and profits have retreated rapidly. In the first four months of 2019, key steel companies of the China Iron and Steel Association achieved a total profit of 23.25 billion yuan, a year-on-year decrease of 22.83%.
my country ranks first in steel production in the world. There is a saying about steel production: Global production depends on China, China's production depends on Hebei, and Hebei's production depends on Tangshan. Such a large output cannot be consumed by domestic real estate and infrastructure alone. It can only be exported. Whether a steel company is making a profit or not, it needs to be exported. Otherwise, will it all sit in a warehouse? This excess production is absorbed through exports.
Therefore, the rise in raw materials has not caused steel companies to lose money, and exports are only a sales channel to consume excess production.
I found a very strange phenomenon. Anyone who does not answer the essence of the question, as long as it is about shady China, the shady system, or corruption, gets a lot of likes, but no one reads the truly excellent graphic analysis. It’s really interesting! First, we need to discuss whether the steel mill is currently losing money?
Since the dam burst accident in the Tamsui River in Brazil at the beginning of the year, the price of iron ore has increased for 8 months. Taking Qingdao Port’s 61.5% Australian fine ore as an example, the current price on a dry basis including tax is 960 yuan/ ton. But what is strange is that the increase in iron ore prices has not been transmitted to steel prices?
On the one hand, the Tamsui River in Brazil is an emergency, not a structural problem. It is difficult for steel mills to change production plans; on the other hand, July and August are the off-season for steel consumption (the summer is hot and the operating rate is low). Low ;), which has resulted in the current price of steel not rising with iron ore. So it is certain that the profits of steel mills are being continuously compressed.
Recently, the rebar gross profit of steel mills in Tangshan has dropped to 500 yuan/ton, but the profit is still in the middle of history. Of course, expenses and rolling costs must be eliminated Wait, the profit may be around 200-300. Of course, it does not rule out that some steel mills with weak cost control have already suffered losses. There are always companies in the market that are doing well but not doing well. But I think this phenomenon will not last. With the arrival of the "Golden Nine and Silver Ten" period for steel mills, the price difference between iron ore and steel will definitely narrow, and the profits of steel mills will also increase.
Let’s assume that steel mills are losing money now, why are they still exporting?
1. Order. The things produced by the steel factory are not produced by me today. I will sell them tomorrow. I have already signed the order, and the same is true for the downstream. If I need something, I must prepare it first. It is not easy to buy it temporarily. You can definitely buy it, but on the other hand, the price will definitely be higher than normal purchases. Therefore, both parties are willing to sign the order, so steel mills with export trade must export.
2. Customers. Customer resources are something that no steel mill will abandon. OK, you sell them to them when you make money, but don’t sell them when you lose money? How to maintain customer relationships? This weak relationship will inevitably be torn apart by other competitive forces and then form a strong partner, while the original ones will only be eliminated. Therefore, we have to export even if we lose money.
Finally, I hope everyone can be more cheerful and not so shady. Please forgive me for any mistakes I made.
Overall, the growth rate of steel production will be greater than the growth rate of steel consumption in the future, and the crisis of steel surplus will be approaching. However, for now, domestic steel companies will not reach the point of losing money. On the one hand, there is a certain amount of iron ore storage, on the other hand, there is still room for profit.
Moreover, around 2012, domestic steel companies experienced a long period of general losses. Because most steel companies have a certain amount of state power in them, they can be supported. If the companies do not operate, they may suffer losses. It is more serious, so insisting on exporting can also increase the source of income, including some factors involving the national level
Why do you still export at a loss? Due to insufficient domestic demand, supply exceeds demand. For example, there were originally only 10 kilograms of steel in China, but 20 kilograms were produced. What about the extra 10 pounds? Exporting is of course the best solution. As for the calculation of losses, if it is not exported, 10 kilograms will become inventory. If the domestic weight in the second year is only 10 pounds. In theory, there is no need for production. Then the upstream of the steel industry also constitutes a large amount of inventory, which will have a great impact on the entire industry.
It is precisely because private ownership cannot solve this problem that the natural cycle of the normal economic cycle is caused. Thus was born the Wall Street model, the reverse push. But this model itself does not solve the problem, it just postpones the problem for a while. And it can also cause a greater crisis. For China, many real estate and infrastructure developments are due to reverse push.
Although the price of iron ore has increased by 80% in 2019, it will not necessarily cause the real cost of raw materials for steel companies to increase by the same amount. In addition to the impact of exchange rates, it also depends on whether the company has Make a risk hedging plan for iron ore raw materials, so it does not necessarily mean that you will suffer losses because of the increase in raw material prices. It still depends on the specific operating conditions and market conditions.
Domestic large-scale steel companies operate on a large scale, and the amounts of raw materials purchased such as iron ore and coal are very huge. However, according to the characteristics and plans of production, they do not purchase and arrange production immediately. Procurement plans need to be made over a longer period of time, especially for companies that need to import high-quality iron ore. The shipping time is not short, and the impact of price changes on costs needs to be considered. Plans need to be made in advance and pre-purchase in the financial market. Enter contracts of equal value to hedge risks to lock in costs.
Therefore, if you control it properly and plan well, you can control the cost. For example, if a steel company made a plan at the beginning of the year and used a hedging strategy at the time, even if you buy now, you can lock the price at the beginning of the year. In terms of price, the actual cost has not increased that much.
As for the export of products, it is entirely a market behavior, related to market demand and the sales strategy of steel companies. Our country is a major steel producer, and steel is a must-have product globally and is widely used in many industries such as construction, automobiles, and household appliances. Expanding overseas is something that many companies are doing. They can adjust production capacity and optimize costs based on operating losses. No company will do business at a loss for a long time.
In general, the rise in iron ore raw materials will not have a loss-making impact on all companies, and product exports are market behavior. Overseas markets are important sales markets for steel companies. As long as they are not supported If you don’t go on, you probably won’t give up easily.
This question is easy to answer. At the beginning, we provided heavy subsidies for the dumping war. After we occupy the market, we will slowly increase its price, just like Meituan Waimai in the past. In the past, the external Meituan Takeout and Are You Hungry platforms subsidized users in large quantities, giving users such a sense of dependence and the habit of ordering takeout when eating. After they control the market 100%, they will slowly pick the fruits and harvest the fruits of victory. At this time, they can slowly raise the price. Because the market is controlled by you, others have no choice, so the steel market is the same. In the beginning, we subsidized users in large quantities, and even did this business at a loss. After we control the global steel market, our Chinese steel companies can slowly increase prices, because then people will have no choice, and then we, China, will The world of steel companies.
Investors are still avoiding steel and cement for the time being during the mid-term results report. However, overall, China's steel industry has experienced industrial adjustment and is improving.
In fact, the intuitive market situation of the steel industry is as follows:
This is the trend chart of iron ore in the past year, an undoubtedly rising curve.
The above picture is from Steel House. Extracting the domestic steel price trend, you will find that in fact the price increase of iron ore has not been transmitted to the price of steel, that is, the domestic Steel prices are falling or moving parallel.
For exports, is there a price difference between domestic and foreign prices?
It cannot be said that international steel prices are higher than domestic ones. In fact, the price difference between domestic and international steel prices is constantly changing. Since my country is the main producer of steel, accounting for half of it. With the above output, basically the pricing of steel in the international market can be based on our domestic pricing. However, the demand in each country is linked to the specific situation of domestic real estate construction in each country. For example, Europe is still somewhat depressed, while the demand in the United States is slightly stronger.
Summary: It is actually very easy to understand why exporting is necessary. From an industry perspective, iron ore has continued to rise, while steel prices have not seen a significant rise. Because global demand is not growing that fast, and the overall export volume of iron ore has decreased due to the floods in Brazil in January. However, this situation is expected to be temporary, and steel mills cannot change their production plans and exit the market due to some short-term factors. Then there is nothing wrong with exporting some steel with excess production capacity.
Due to supply-side reform and production capacity optimization and exit, the situation of the steel industry from January to April this year was actually pretty good. Against the background of rising iron ore prices, the profit margin averaged 3.5% in 2018. The profit margin once reached 7%, which shows that the policy-level actions are effective, improving the profitability of existing steel industry enterprises, improving product quality, and reducing the inefficient output of crude steel.
At this stage, I personally think that the huge output of steel may become a sharp tool to squeeze the steel industry of other countries and gradually control the global steel industry chain.
Of course, it needs to maintain positive profit margins and deal with anti-dumping investigations led by other countries' trade protectionism.
However, investors still cannot be optimistic about steel stocks in the middle of the year. They have to wait for the inversion between iron ore and steel prices to be gradually smoothed out. After all, the steel industry is a cyclical industry and is linked to real estate. Recently, real estate loans are tightening. Of course, the reverse price pressure will also make the steel industry accelerate industrial transformation and survival of the fittest, and increase the added value of products. This road has a long way to go, but it has to be taken now.
The loss is fake! It is true that the profits go into the pockets of officials! Do you still remember that year when Australian ore increased hundreds of times? That’s giving the country’s money to Australia! After selling the country, domestic officials received dozens of times the kickback! ! ! Executives have no good stuff! They can betray the country for personal gain! ! ~
If China builds fewer houses, why does the iron ore mine increase? The demand from steel companies is huge, which brings high housing prices and high pollution. The United States is so rich, why are there not as many high-rise buildings as China?
The more state-owned enterprises lose money to their bosses, the higher the annual salary and the greater the kickbacks