Statistics Analysis by Tianjin Customs of China for Monitoring and Alerting

Transcription

1 Dynamic Information of Customs Districts Chapter 72 Iron and Steel Chapter 73 Articles of Iron or Steel Statistics Analysis by Tianjin Customs of China for Monitoring and Alerting Issue No. 454, 2010 By the Statistics Department, Tianjin Customs of China May 11, 2010 Tianjin Port Presented Growth in Steel Imports from January till May 2010 According to Tianjin Customs statistics, from January till May 2010, Tianjin Port imported 464,000 tons of steel products with a value of USD 740 million, respectively up 28.9% and down 9.4% year-on-year. Ⅰ Main Characteristics in Tianjin Port s Import of Steel Products from January till May 2010 (1) Imported mainly by the mode of ordinary trade. From January till May 2010, Tianjin Port imported by the ordinary trade 391,000 tons of steel products, up 26.1% year-on-year, accounting for 84.3% of its total quantity of steel imports during the same period. (2) Imported mainly by foreign-invested enterprises. From January till May 2010, foreign-invested enterprises with Tianjin Port imported 347,000 tons of steel products, up 57.4% year-on-year, accounting for 74.8% of its total quantity of steel imports during the same period. (3) Imported mainly from Japan and the R. O. Korea. From January till May 2010, Tianjin Port imported 183,000 tons of steel products from Japan, up 92.8% year-on-year, and imported 177,000 tons from the R. O. Korea, up 11.6% year-on-year. The both totally accounts for 77.6% of its total quantity of steel imports during the same period.

2 Ⅱ Main Causes of Growth in Tianjin Port s Import of Steel Products from January till May 2010 (1) The growth in import was due to the penetration with low-price strategy by external steel products. Last year, China took the lead in economic recovery, with domestic demand keeping strong for steels. Under the global economic downturn, global steel manufacturers tried hard to penetrate into Chinese market by increasing their exports with the low-price strategy. As per relevant statistics, Japan yielded million tons of crude steel this February, exceeding 8 million tons in the consecutive 7th month, up 54% year-on-year which is the 2nd high in history since the 58.3% of August Japan Iron and Steel Federation indicated that the sharp increase in steel exports to Asian market (especially the R. O. Korea and China) had been the impetus to the rapid increase in Japan s output of crude steel. Meanwhile, the price of imported steel products has slumped year-on-year at Tianjin Port, where the substantial increase in steel imports therefore resulted from the strong penetration by low-price steel imports. (2) The import was driven by the steady increase in China s domestic demand for steel products. As surviving the global financial crisis, China boosted its confidence in economic growth, with steel imports propelled by the rapid growth in domestic consumption. In the 1st quarter, the investment in fixed assets for the whole society reached CNY billion, up 25.6% year-on-year, with CNY billion therein as the investment in real-estate development, up 35.1% year-on-year and accelerating by 31 percentage points year-on-year. China s industrial production has risen quickly again, presenting a favorable development in major downstream industries. In the 1st quarter, China s gross added-value of industries above designated size increased by 19.6% year-on-year, accelerating by 14.5 percentage points year-on-year, with the growth rate of 22.1% shown by the heavy industry closer to the steel consumption. According to the market monitoring by China Logistics Information Center, the domestic market consumed 168 million tons of steel products in the 1st quarter of 2010, up 23.0% year-on-year, the speed in growth higher 2.5 percentage points than the whole last year. Factors in driving the investment demand were more than the architectural steel products. Many stations, airports and high-rise buildings were almost entirely in a steel structure. Since this March, as the external steel-mills such as in Japan and the R. O. Korea accepted the price rise of 90% for iron ores, the market price of steel products has been rising substantially at home and abroad, the average rise-scale higher 15%-20% than that during January till February 2010 and the scale of 30% exceeded for some of steel varieties. The continuous rise in the price in China, along with that in profits also contributed to the increase in China s import of steel products.

3 Ⅲ Some Notable Issues (1) Chinese enterprises have made new progresses in their mergers and acquisitions of overseas iron-ore suppliers. According to the China Iron & Steel Association, Brazilian mining giant Companhia Vale Do Rio Doce (CVRD) claimed to Chinese steel enterprises that the benchmark price of iron ores should be raised by 90%-100% for If following the raising in 2010 for most imports of iron ores, Chinese iron and steel industry may suffer from an all-round loss. The negotiations on iron ores came to a deadlock between Chinese and foreigners. Against that background, it is a new progress that the Eastern China Non-Ferrous Metal Geological Exploration Bureau will purchase 100% property right of the Jupiter project of Bernardo de Mello at the cost of USD 122 million. The Jupiter project is located in the Minas Gerais state of Brazil, namely the world-famous iron quadrilateral region, which stores the most of both Brazilian iron ores and those for CVRD. As a surface mine with a prospective ore reserve of 1,390 million tons, that mine is able to provide ore concentrates of 65% grade for export after simple mining and dressing of iron ores. At present, the mine has gone into operation with an annual output of 3 million tons of iron ore concentrates. With additional investment, its output is expected to reach 20 million tons per annum. As estimated, the project will bring 20% return-on-investment each year to the Eastern China Non-Ferrous Metal Geological Exploration Bureau. In 2010, the world-market price of iron ores is possible to surge by more than 100%. In addition, with the introduction of quarterly contracted pricing mechanism, its price will probably show more drastic fluctuations following any changes in markets. As to the entire iron and steel industry of China, the acquisition of overseas iron-ore source is a necessary move of adapting to new rules of the international iron-ore market. (2) Chinese steel enterprises might fall into business losses again. With the creation by three ore giants of multiple pricing modes based on the index-linked price, the pricing of iron ores will be index-linked along with the lack of pricing right for international freight. This means Chinese steel enterprises will be subject to more frequent price adjustment for raw materials, resulting in more and more loss-incurring enterprises. With the price raised by ore giants, Chinese steel enterprises are now under the suppression by both the rising of upstream cost and the dropping of downstream sales-price, profits compressed substantially. Therefore, business losses may occur again to Chinese steel enterprises originally under low profitability.

4 With the introduction of the new policy for real estate and of the control policy for steel exports, China will see the gradual contraction in domestic demand for steel products. Without the improvement in domestic demand, Chinese steel enterprises cannot balance out the rising in iron-ore price through raising the steel price. Without final conclusion reached on the iron-ore negotiations, Chinese steel enterprises might fall into business losses again. (3) The domestic steel market remains gloomy. By June 1, 2010, the domestic average price of screw-thread steels was CNY 4,136 per ton, down CNY 333 per ton month-on-month with the scale of 7.45%, while the price of major steel varieties down CNY per ton compared with the early May The continuous decline should be attributed to an over-capacity as the output of crude steels had a new high according to the latest economic performance data of China. In addition, the declining scale is aggravating based on the price policies for June 2010 of major steel-mills such as Baosteel Group Corporation and Wuhan Iron and Steel Company (WISCO), in which the factory price of nearly all products are defined to remain as that for May 2010 along with preferential margins increased on a few products, further stimulating related businesses to sell off goods by lowering prices. Meanwhile, the recent regulation on the real-estate market directly resulted in the price decline of architectural steels. Subject to a series of nationwide and local regulatory policies on the real-estate market, the transaction volume of real estate has fallen into a trough with a gradual weakening support for the building-material market. There also shows a decline in the price of flat-steel products such as hot rolled steels and cold rolled steels, as the businesses are generally underselling steels on the spot market. It is notable that some steel-mills have now started overhauling facilities and reducing their output in order to control their losses. Ⅳ Relevant Recommendations (1) Strengthening the monitoring and alerting on steel imports and exports. When stabilizing our export shares, the Government should actively take measures to curb the rapid growth in steel imports, relieving its impact on domestic market; the Government should also actively cope with international trade frictions to safeguard proper interests of domestic industries.

5 (2) Optimizing the structure of our steel industry to promote the healthy and orderly development of domestic steel market. The Government should guide the steel enterprises to reasonably arrange for their production by paying close attention to any changes in the market demand for steel products at home and abroad. In addition, the Government should enhance the examination on nationwide steel projects to effectively control the blind over-capacity in the steel industry. (3) Accelerating the integration of existing steel enterprises to enhance the industrial concentration. The Government should make efforts to integrate technological resources throughout the steel industry, particularly intensifying the development of production processes and applied technologies and promoting the restructuring of the steel industry. At present, China has not only made little progress in the cross-region integration and restructuring, but encountered some resistance in eliminating backward production capacities. (Jointly by Fang Zhi with the Customs House of Tianjin Economic-Technological Development Area, Xue Chuan with the Customs House of Tianjin Port Bonded Area, Han Daqiang with the On-Site Operations Department of Tianjin Customs, and Ren Kai with the Statistics Department of Tianjin Customs) Notice The English version of the tables and articles are translated by ETCN. In case of any divergence, the Chinese text shall prevail. This service is provided for reference and study purpose only. Without the written consent of ETCN, any media, website, business organization and individuals are forbidden to apply the contents for profit purpose, transfer, resell, and release to any third-party in any way. ETCN International Inc. (+86) (0)