Like many steel traders, Lei Jun, the general manager of Minmetals Beijing Branch, has also experienced a “great joy and sadnessâ€. Talking about a bit of this year, Lei Jun seems to be very calm. "As a balloon, the air blowing is too full, it will inevitably explode at a node."
Crazy feast "The steel price changes in the first half of the year are exciting." Lei Jun still remembers clearly that after steel trading companies in various regions completed the "winter storage" at the end of 2007, steel prices began to soar to Tianjin. For example, the market price of 5.5×1500×c hot-rolled coil reached a record high of 5,950 yuan in mid-July and was up 1300 yuan from the last day before the Spring Festival on February 5, an increase of 27.96%.
"The most important thing is that the market has a good market and the international and domestic demands are very big. The steel that spent more than 3,000 yuan/ton in the previous winter can earn more than 1,000 yuan per ton." Here, the boss of the state-owned company is also sighed. Road, "At that time there was no need to worry about users. The key is whether or not we would like to sell our steel products. We must know that the price of a postponed sale may rise by a few hundred." As a businessman, Lei Jun also bought four or fifty thousand yuan at the beginning of the year. The stockpile of tonne stocks has been in the hands for nearly two months before it started to take delivery. It is this kind of deposit and sale that allows most traders to make staggering profits. “If you purchased 10,000 tons of steel a year ago, you could easily earn more than 10 million,†Lei Jun told reporters.
The driving force behind the rise in steel prices came from strong demand in the steel downstream market. From January to June, the total investment in fixed assets of the real estate industry in China reached 1504.927 billion yuan, an increase of 35.1% year-on-year. From January to June, the main domestic steel consumption industry was automotive and civil steel. The accumulated shipments of quality boat parking, washing machines, and refrigerator products increased by 17.6%, 42.5%, 18.1%, and 10.3% year-on-year, respectively, while international demand also remained high. In June, China’s steel exports reached 5,126,700 tons, and reached its highest level in August. Point 767.74 tons.
"At that time, the steel mill was the oldest, usually traders seeking steel to buy steel, to 1,000 tons can only give 300 tons, had to trust." Lei Jun told reporters. Statistics show that in the first half of this year, the entire steel industry achieved a 20% to 30% increase in net profit. According to the data from the China Iron and Steel Association, the 71 large and medium-sized steel companies included in the statistics achieved sales revenue of 1,327.38 billion yuan, a year-on-year increase of 41.78%; and profits of 1.01047 billion yuan, a year-on-year increase of 26.1%.
The market seems to be stepped out of the air for a moment. Under the perfect market appearance, the crisis has been surging in this seemingly prosperous industry.
Since the beginning of March, the sales volume of the automotive industry downstream of steel has never exceeded the level of the same period in 2007. Since mid-May, there has been a continuous decline. The growth rate of fixed asset investment also began to slowly decline.
The signal of reduced downstream demand has been unable to dispel the enthusiasm of steel mills. Not only small and medium-sized steel plants have been launched, but also large-scale steel mills have continuously increased their production capacity. In June, the output of the whole industry hit a record high of 53.8272 million tons.
The high profits make these traders who were originally "smart" started to become greedy. They are not eager to ship, but want to buy more steel. “At that time, there was a saying that after the Beijing Olympic Games, the resumption of work on large-scale projects will result in a big rebound in the price of steel driven by the Beijing market. Many Hong Kong trade companies have rented out warehouses in the surrounding areas of Beijing and purchased them at high prices. A large number of steel products," Lei Jun said, "Although the market volume has been declining since June and July, most traders still choose to purchase large quantities of steel at high prices, and the 'panorama' trend is spreading in the industry. ."
“I started to speed up inventory evacuation from June.†He also considered that the fastest recovery of the market after the Olympics would be until the end of November. The time is too long. The more he presses the goods, the more risky he is.
This "strange" decision not only made it difficult for his peers to understand, but also put him in a paradoxical situation. "At that time, I reduced the warehouse inventory to more than 3,000 tons, and our inventory could reach 45,000 tons, once the price continues to rise. My decision will mean that I will probably lose tens of millions of yuan to the company." Lei Jun paused and said, "At that time, my heart was really panicked and very hairy."
Another important reason to support Lei Jun’s decision is his shrinking orders. “In August, one unit of our original delivery had originally fifteen or six sites. At that time, only two or three were left. In fact, we can obviously feel that the economic situation has started to change.†Lei Jun told reporters that under the unified deployment of the company, The company's new steel products are no longer in storage, they are sent directly to the construction site, and they continue to expedite the emptied of high-priced steel purchased in the previous period and return the funds. "In mid-September, when we produced 5,000 tons of steel at a high of 5,500 yuan, we began to take out goods 100 yuan to 200 yuan less than the market price, so that by the end of October the basic stocks had been emptied," Lei Jun said.
"But I didn't expect prices to fall so much," Lei Jun told reporters. "You know, there is no volume when the price falls. The more deadly thing is that the demand in the entire market has shrunk." In his description The reporter learned that starting from late July, the prices of steel mills and the market were “upside downâ€. Afterwards, the steel mills withdrew their funds and pushed down the price. The price of steel products has been declining all the way. After the Olympics, it was a rapid dive. In mid-October, The steel of each line generally fell back to around 3500/ton, a drop of more than 50%.
Other large numbers of traders who purchased steel at a high price of 5,000 yuan/ton or more were unable to sell their products. They could only watch the price low day by day and could not do anything. At the same time, the total loss of 71 domestic large and medium-sized steel enterprises included in the statistics in October reached 5.924 billion yuan. In November, the financial indicators of steel enterprises continued to deteriorate.
The future market cannot predict the arrival of the “winter storage†in the new year. However, for most traders including Lei Jun, it has reached a “decision†period. Lei Jun admits that the current price of steel is close to the cost of production, in theory, it is a time for “mining the bottomâ€.
"But where is the bottom? No one can estimate. This is the only time I've been in this line for more than a decade. It's the only time I'm confused." He admitted to reporters, on the one hand, the downstream industry of steel, including automobiles and real estate, under the global economic crisis. Demand is also declining. On the other hand, the country’s macroeconomic regulation and control of 4 trillion yuan in expanding domestic demand policies and the launch of various government infrastructure projects have also shown that domestic demand will boost steel demand in the next year.
In fact, under the circumstances that major steel mills have plummeted in market prices and there has been a significant loss in operations, steel mills have reduced their production and limited production by 20.31%. In October, total domestic steel production reached 4.929.15 million tons, a decrease of 109.432 million tons from June. At the same time, bank credits have also begun to relax the "steel prices." The data shows that since November, domestic steel market prices have stopped falling and have risen slightly. The LGMI Domestic Composite Steel Index rose by 3.9% in December from a year earlier, the first month-on-year rise since the decline in May.
“What matters most to me now is whether the policy can be implemented, how many new projects are added, and how much is the new demand for steel? However, these are difficult to estimate,†Lei Jun said. “Others At present, small and medium-sized steel mills are starting to work again. With the increase in the supply of steel in the market, will steel prices be pulled back?â€
In Lei Jun’s view, “prudence†will be the most important one in his decision-making next year.
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