At the end of the year, however, the tide of work has begun, and major projects in many places across the country are intensively started.
Since December 2019, the price of rebar futures has been oscillating sideways. According to the latest news from my iron and steel network, near the Spring Festival, major projects in many places across the country have begun intensively, ushering in a wave of construction at the end of the year. According to incomplete statistics from Mysteel, in December 2019, the number of major projects started in all regions exceeded 3,100, and the total investment amount was nearly 2 trillion. Among them, Anhui, Fujian, Shenzhen, Sichuan and other places have started construction of major projects with a scale of over 100 billion yuan. details as follows:
Infrastructure construction will pick up this year. The December Politburo Conference pointed out that it is necessary to accelerate the construction of a modern economic system, promote the high-quality development of agriculture, manufacturing, and service industries, strengthen infrastructure construction, and promote the formation of a regional economic layout with complementary advantages and high-quality development. Enhance scientific and technological strength and innovation capabilities, deepen economic system reform, and build a new level of open economic system. Among them, the new "strengthening infrastructure construction" is of particular concern.
The growth rate of infrastructure in 2019 is lower than market expectations. The core problem is that the financial constraints established during the deleveraging process have limited the source of infrastructure funds. In 2020, we believe that there are opportunities for marginal improvement. First, there are signs of accelerating the pace of this round of policies. Project application and approval in the third quarter of 2019 has accelerated significantly, and project preparations that can be started in early 2020 are relatively adequate. Second, the scale of tax cuts in 2020 may be smaller than in 2019, and fiscal revenue and expenditure constraints in the budget will be smaller. Third, the State Council issued a special debt of 1 trillion yuan in advance, and "cannot be used in land reserves and real estate-related fields, debt replacement and industrial projects that can be fully commercialized." Compared with the real estate projects such as land and shed reform in 2019, which are seriously crowding out capital investment projects, special debt will be used more for infrastructure. Fourth, the scale of special bonds is expected to expand, coupled with the new policy on special bonds and new regulations for project capital, the scope of use and leverage will be stronger. Fifth, the re-emergence of PSL may provide additional support for infrastructure.
The manufacturing industry will usher in a replenishment cycle. If you observe the year-on-year inventory of finished goods of industrial enterprises as a basic indicator, you can see that there is a very obvious inventory cycle in China. The length of each round cycle is 3-4 years, and it has been 40 months since the bottom of the last round of the inventory cycle, which basically meets the time condition of the bottom of the inventory cycle. In terms of scope, the bottom of the experience of each round of inventory cycle is that the year-on-year growth rate of the inventory of finished products of industrial enterprises is zero. As of October 2019, the indicator was 0.4%, and the decline was close to the bottom of experience. Therefore, based on historical experience, it is expected that the inventory of finished products of industrial enterprises will bottom out in 2020, and the finished products entering the replenishment stage will surely drive the demand for manufacturing raw materials to a certain extent. From experience, PPI also has It has a very strong correlation with the inventory cycle.
In addition, each round of inventory cycle bottoming will be accompanied by interest rate bottoming, industrial product prices rebounding, and import bottoming. There are similar situations in this round of cycles.
The yield on the 10-year Treasury bond reached a low of 3.05% in August 2019, after which a round of upsurge occurred. After October, the prices of non-ferrous metals represented by copper have risen sharply, and the PPI has rebounded for many consecutive months, and may have hit the bottom of the round in October. The PMI of major international countries has picked up and is expected to enter a stage of stabilization. The above phenomenon reflects that the current inventory cycle has entered the bottom area, and active stock replenishment may be ushered in at any time.
The recovery of the automobile industry chain, the continued repair of infrastructure investment and the further rise of real estate completion will drive this round of manufacturing replenishment.
Steel supply will follow changes in profits. Domestic steel production capacity will increase in 2020, but supply changes may be more flexible. As scrap prices remain the highest priced raw materials for a predictable period of time, their impact on steel supply will be significant. Generally speaking, the supply of steel in 2020 should fluctuate up and down with changes in profits. Supply may provide more upper and lower limits for the price of steel in 2020, but it cannot affect the direction significantly.
Driven by the recovery of infrastructure construction and the replenishment of manufacturing industries, steel demand is guaranteed in 2020. At present, winter demand is shrinking. With steel prices mainly dominated by expectations, rebar prices may show a oscillating trend. However, after the winter storage, if the stock accumulation rate does not significantly exceed previous years, there is room for further increase in rebar prices. Investors are advised to wait and see in the short term and wait for long opportunities after the winter reserve. (Author: Qianhai Futures)
□ .. Zhao. Yi. Ming. Period. Goods. Daily. News