Jingchuan, deputy general manager and chief economist of Zhongda Futures, said at the "2018 Black Futures Forum" that the black department will begin to weaken at the end of the first quarter of next year.
Jingchuan analyzed the supply, demand and outlook for the future of the black system from a macro perspective. He said that in terms of supply, the future supply-side reform will enter a new stage, and the capacity utilization rate of steel mills nationwide will rise steadily, approaching the 80% threshold. More than 80% of the capacity utilization rate is an internationally recognized normal level, which indicates that China's steel industry has re-entered the balance of supply and demand. And the "13th Five-Year Plan" to reduce the crude steel production capacity of 150 million tons of on-line target is expected to be completed ahead of this year. It is the primary goal of 2019-2020 to consolidate the results of production capacity, strictly control new capacity and prevent production capacity rebound.
He believes that in 2018, real estate investment and real estate construction will remain high, which will give some support to the black demand side. Due to the pessimistic expectations of real estate in the market, the sales demand will decline, the newly started new real estate will be difficult to maintain for too long, and ultimately the real estate investment will also decline.
According to him, the current leverage ratio of Chinese residents is close to the more dangerous range. Resident debt has grown by more than 20% per year, while annual income growth is less than 10%, and regulators’ strict inspection of consumer spending will further weaken residents’ Leverage ability. This means that the factors that will support real estate sales will disappear in the future, the real estate cycle will come to an end, and the demand for industrial products will fall.
Liu Jun, general manager of COFCO Futures Building Materials Division, also believes that the growth of real estate in China is unsustainable. The inflection point cycle of real estate has already appeared, and it has entered the stage of de-realization and diversification. In the future, more building materials will replace the status of steel, and the demand for steel in real estate will gradually weaken.
In Jingchuan's view, the demand side of industrial products is mainly infrastructure investment and real estate investment. Since the beginning of this year, basic investment has been declining all the way, but real estate investment still maintains a high growth rate, making the overall black show strong resilience. Looking forward to next year, infrastructure is expected to stabilize, and real estate will start to weaken, which will lead to weak overall performance of the black system. The continuous decline in the land purchase area indicates the pessimistic expectation of real estate developers on the market outlook. It is expected that the new construction of the real estate will lag behind for 3-6 months. At the end of the first quarter of next year, the black system will begin to weaken.