SteelOrbis Shanghai
Recently, CISA Deputy Secretary-General Qi Xiangdong made a statement regarding the current steel market situation and the Chinese steel market.
Mr. Qi Said, the downstream demands in the steel market at home and abroad have been actually shrinking under the effect of the financial crisis, however, the shrinkage of demands has been exaggerated and thus resulted in "three Losts". Firstly, the market confidence is lost. Producers, traders and downstream corporations are all pessimistic and wondering when the economy can recover; Secondly, the function as "sluice pool" of end-users' inventories is lost. Before, the turnover of steel in the market was very significant, so both the mills and the downstream companies would prepare certain quantity of materials in stock. But now the downstream corporations are reluctant to keep inventories, as a result, all the materials are being piled in the warehouse of the mills. The excessive stock and cash difficulties have been forcing the mills to sell regardless of cost; thirdly, the base price or reasonable price is lost. In addition to that, other irrational factors also play a role to drive the steel prices to decline continuously.
Mr. Qi expected that the potential of demands in the steel market would be great since China has already taken many measures to drive up the demands in the domestic market. As he stated, the steel market will be still in difficulty in the 4th quarter of 2008 and the 1st quarter of 2009, but turnaround will appear in the 2nd quarter. It is expected that in 2009 the market situation will be better in the second half than in the first half.
Regarding the elimination of out-of-date capacities, he pointed out that the standard to distinguish the advanced productivity and capacity from the out-of-date is not the size of the corporations, and you can not say the capacity to produce steel for construction use is out of date. The so-called out-of-date mean the disqualified capacities and equipments. It will take long to eliminate the disqualified capacity, to annex and regroup, and to improve the centralization of the industry.
As he mentioned the export of steel, he emphasized the strategy of diversification in terms of the export destination and the products. At present, the export volumes to developed countries have decreased significantly, but new destinations have yet to be developed. Also, great attention should be paid to the risks deriving from the changes of currency exchange rates.