(1) Total demand for refractories shrank in the first quarter of 2022
In the first quarter of 2022, China's steel output decreased year-on-year compared with the same period last year, and the decline was larger. The detailed data will wait for the results to be announced by the authoritative department on April 15. However, this situation can be seen from the national crude steel output data from January to February, as well as the statistics of key steel enterprises in late March.
According to the statistics of the China Iron and Steel Association, the national crude steel output from January to February was 157.96 million tons, a year-on-year decrease of 10%, and an increase of 12.9% in the same period last year; The output of steel was 196.71 million tons, a decrease of 6%, and an increase of 23.6% in the same period last year. The output of coke was 74.36 million tons, down 7.6%, compared with an increase of 10.3% in the same period last year. The output of ferroalloys was 5.49 million tons, a decrease of 9.2%, compared with an increase of 27.9% in the same period last year. In late March 2022, key statistics showed that steel enterprises produced a total of 2,376 crude steel. 110,000 tons, pig iron 2044. 510,000 tons, steel 2,328. 330,000 tons. Among them, crude steel Nissan 216. 010,000 tons, an increase of 5. 41%, down 6. 81%; Pig Iron Nissan 185. 860,000 tons, an increase of 3. 47%, a year-on-year decrease of 5.62%;
From the above data, it can be roughly estimated that the year-on-year decline in crude steel production in the first quarter of 2022 will be about 6%. From this point of view, it can be roughly seen that the demand for refractories in steel mills must also be declining, with a decline of more than 5%, and the total demand for refractories in other high-temperature industries is not strong.
(2) The macroeconomic pressure in 2022 is high
The National Bureau of Statistics (NBS) released the PPI and CPI indices for March 2022. In March 2022, the national industrial producer prices rose by 8.3% year-on-year and 1.1% month-on-month; The purchasing prices of industrial producers rose by 10.7 percent year-on-year and 1.3 percent month-on-month. In the first quarter, the ex-factory prices of industrial producers rose by 8.7 percent over the same period last year, and the purchase prices of industrial producers rose by 11.3 percent. The rise in the price of various factors of production, especially the rise in natural gas prices, has led to an increase in the manufacturing costs of enterprises in the first quarter, which may be the mainstream trend in 2022, and I believe everyone has a more concrete feeling.
In March 2022, the national consumer price rose by 1.5% year-on-year. Among them, the urban area rose by 1.6%, and the rural area increased by 1.2%; Food prices fell by 1.5 percent and non-food prices rose by 2.2 percent; Consumer goods prices rose by 1.7 per cent and services by 1.1 per cent. From January to March, the national consumer price rose by 1.1 percent over the same period of the previous year. There is still a big gap between the above data and the feeling of everyone's daily life.
According to incomplete statistics, in March 2022, a total of 16,740 projects were started across the country, down 18.2% month-on-month; The total investment amounted to nearly 7 trillion yuan, down 38.5% month-on-month and 44.5% year-on-year. In March, affected by the epidemic in many places across the country, the progress of construction was delayed, and the amount of investment in projects started nationwide decreased to a large extent compared with the previous month.
As of April 11, a number of listed real estate companies announced their sales performance in the first three months of 2022, according to Mysteel statistics, the sales of 15 key real estate companies from January to March 2022 totaled 697.253 billion yuan, a year-on-year decrease of 39.88%. According to the data of the China Passenger Car Association, the retail sales of the passenger car market reached 1.579 million units in March 2022, a year-on-year decrease of 10.5% and a month-on-month increase of 25.6%. The cumulative retail sales from January to March were 4.915 million units, down 4.5% year-on-year and 230,000 units year-on-year, and the overall trend was lower than expected. According to statistics from the China Internal Combustion Engine Industry Association, in February 2022, the sales volume of diesel engines for construction machinery was 70,700 units, a decrease of 12.53% month-on-month and a year-on-year increase of 2.32%. The cumulative sales from January to February were 151,500 units, a year-on-year decrease of 10.71%.
Overall, in the first quarter of 2022, the macroeconomic situation is not very good, especially the weak total consumption and total demand, which will undoubtedly bring greater pressure to the operation of the refractory industry.
(3) The operation of the refractory industry in the first quarter of 2022 is not optimistic
In terms of bulk refractory raw materials, the overall performance of the market is not good. According to the research of the refractory window network, the trend of fused magnesia in March was mainly stable, and the prices of some companies were slightly reduced. The market price of sintered magnesia decreased slightly. The epidemic control in Liaoning has had a certain impact on the normal production of magnesia enterprises, and it is intriguing that the long-term suspension of production has not been able to form a supply bottleneck, and the overall magnesia supply situation is normal and the sales price is stable.
In March, the domestic corundum market was weak as a whole. The market volatility of brown fused alumina sand is weak as a whole, and there are slight price reductions in various places. The market price of white corundum also decreased slightly, silicon carbide manufacturers started construction in March, and the market price of silicon carbide was basically stable. Bauxite in March was stable and strong, and the main producing areas of Shanxi gradually recovered to normal production from the environmental protection control in the early key periods, and the production cost continued to be high.
In terms of refractory products, according to the statistics of the China Resistance Association, the national refractory production data fell by about 8.1% from January to February, and the output of key statistical enterprises in February fell by 10.14%, and the industry output data of the industry in March is still being counted. The decline in output from January to February is mainly due to the environmental control of Beijing, Tianjin, Hebei and Henan, which led to the forced suspension of production by many refractory companies, which is the main reason for the decline in output. At that time, the suspension of production led to the inability of refractory products enterprises to deliver on time, and the execution of some orders caused the current production and delivery to be tight. In the research of the association at the end of February and the beginning of March, the workshop production tasks of key enterprises at that time were generally full, giving people the feeling that although the "efficiency" was not good, the "amount of energy" was okay! However, this situation has changed greatly by the end of March, and some enterprises have pressure on orders, and production has declined. The rise in raw material prices in the refractory industry in 2021 did not form a good cost transmission mechanism at that time, resulting in a sharp decline in the operating profit of the whole industry in the fourth quarter of 2021, and also caused a strong "sequelae" to the operation of the industry in the first quarter of 2022. The operating efficiency of the enterprise is not as good as that of the same period last year. At this stage, due to the epidemic situation, logistics costs have also risen significantly.
Excessive competition in the same industry has also caused the sales prices of some products to decline. The blind expansion of the production capacity of silica bricks, the price of each other, and the price of the product fell by about 10-15%, which is a negative example, which is not conducive to the healthy development of the industry. The general feeling is that the production and operation of product enterprises in 2022 will be under great pressure.
(4) The export of refractory materials in the first quarter of 2022 was better
In terms of refractory exports, the total export volume and export trade volume of refractory raw materials from January to February also showed a significant increase, with a year-on-year increase of 30.61% and 62.27% respectively, of which the export volume and export trade volume of refractory products increased by 44.57% and 57.15% year-on-year respectively. Refractory exports continued to remain stable in March, and it is estimated that the total export volume of raw materials and products from January to March increased year-on-year, and the specific data will be released at the end of April. The recent rise in demand for Chinese refractories in Eastern European markets may be an unexpected result of international sanctions against Russia. On the other hand, it also shows that domestic refractories have strong manufacturing capacity and substitution ability, and export competitiveness is further improved.
(5) Summary
In the first quarter of 2022, the overall situation of the industry operation is that the production operation is generally stable, the volume and energy have shrunk, the cost has risen significantly, the profit has declined, and the operating pressure of product enterprises is greater. On April 7, Premier Li Keqiang of the State Council presided over a symposium of experts and entrepreneurs to analyze the economic situation and listen to opinions and suggestions on the next step of economic work. Li Keqiang pointed out that market players are an important foundation for stabilizing economic fundamentals. It is required to further release advanced coal production capacity, implement policies to support coal-fired power enterprises to generate more electricity, and ensure a stable supply of energy. Strengthen coordination, ensure the orderly operation of backbone networks such as transportation trunk lines and ports, and study and adopt targeted measures in serving truck drivers, alleviating the difficulties of freight operators, and reducing logistics costs, so as to promote the smooth flow of international and domestic goods and maintain the stability of the industrial chain and supply chain. On April 11, Premier Li Keqiang presided over a symposium of the main heads of some local governments in Jiangxi, emphasizing that stability should be the first priority, seeking progress while maintaining stability, and supporting economic operation within a reasonable range with stable employment and stable prices. These two meetings also show that the government is aware of the difficulties that our enterprises are currently facing. The recent drop in coal prices is a sign of the country's efforts to lower the level of energy prices and reduce costs for companies.
On April 10, 2022, the "Opinions of the Central Committee of the Communist Party of China and the State Council on Accelerating the Construction of a National Unified Market" was released, which is a further deepening of the "acceleration of the construction of a unified domestic market" in the "14th Five-Year Plan", which means the arrival of the era of China's "large domestic demand" and provides an action plan for the construction of a national unified market. Although there is no provincial market barrier problem in our industry, refractories in Northeast China can be sold to Fangchenggang in Guangxi, but our industry has the problem of "low market efficiency". Whether the current overcapacity in the refractory industry hinders market efficiency is worth thinking about in the industry. The association organized everyone to discuss the proposition that "the interests of the industry are greater than the interests of the enterprise", and it is the common task of the industry peers to grasp the relationship between the two. It is believed that China's market size and market efficiency will be further improved in the future. On the one hand, it can establish sufficient security support for China's economy to cope with external storms; On the other hand, it will also remain attractive to global enterprises and resources, and continue to maintain the initiative in the great power competition. I also believe that the refractory industry will usher in a new stage of high-quality development, but it requires everyone's hard work.
