Basic Industry Strain: Steel Mills Are Facing Insufficient Capacity And Refineries Are Preparing For "Minimum Load Operation".

"According to the recent arrangements at headquarters, we have begun to study the" minimum load "for the normal operation of refineries in the coming period. A northeast refinery official told the twenty-first Century business news reporter, "in addition to the mask, disinfectant and other key raw materials production at full time, other production lines are downgrading."

He told reporters that in the next period of time, gasoline and diesel will be reduced by 25%, aviation kerosene is 50%, and other chemical products have been reduced to varying degrees. Under the epidemic, their situation is not particularly bad.

"Local refineries are more affected." An industry insider told reporters, "because of traffic control everywhere, gasoline and diesel, especially aviation kerosene, are now facing great obstacles."

Different from the refining and chemical industry, a local steelmaker told reporters that there is no clear preparation for capacity decline. The more serious is the shortage of transport capacity. "Traffic control everywhere, on the one hand, makes it difficult for the port's iron ore to enter the factory, and on the other hand, it is difficult to make good use of foreign goods." He said, "as for the follow-up capacity adjustment, we must look at the demand of the market, and now we can not say it."

Global commodity price decline

Since the outbreak of the new crown disease, global commodity prices have been decreasing.

As of press release, Brent crude oil price was 56.62 U.S. dollars / barrel, compared with January 20th before the spread of the disease compared to January 20th, a decrease of 7.8 U.S. dollars / barrel, a drop of over 12%; domestic crude oil futures on the 3 day opening limit, closed at 415.5 yuan, or 8.01%.

On the same day, Shanghai copper opened the same price limit on the 3 day, but the subsequent decline narrowed, eventually closing at 45050 yuan / ton, 6.48% down the whole world. The three month copper of the London Metal Exchange fell 47 US dollars on Friday, at 5587.50 US dollars per ton. Compared with January 20th, it fell by 683 US dollars, or 11%. Copper is often regarded as a barometer of the global economy.

On the 3 day, the domestic main iron ore continued to contract at the same time as the main contract, and remained at the closing price, closing at 606.5 yuan / ton, or 7.97% on the same day. The S & P global przewalskii estimated the price of the 62 iron grade iron ore in February 3rd was 79.8 US dollars / ton, and in January 23rd it was 92.05 US dollars / ton, or 13.3%.

"Crude oil has actually been supported by geopolitical and supply side uncertainties since mid late 1, but these messages are not effective enough for the epidemic." An oil business person told reporters.

So is iron ore. "Basically speaking, the supply of iron ore is actually tight, and the price drop from 20 to 23 January is largely due to slowing demand before the holiday." The above steel enterprises told reporters, "but the subsequent decline can clearly see the concerns of China's epidemic situation."

For China, the import dependence of crude oil and iron ore is relatively high, and the decline of raw material prices will reduce the burden on enterprise procurement. However, the uncertainty of the downstream demand outlook has caused many market participants to have doubts.

"It is not only crude oil prices, crude oil prices and spot premium has also declined significantly, which is actually a good thing for us." The above oil companies told reporters, "however, because of the sharp decline in traffic demand, the demand for gasoline, diesel and kerosene will be significantly reduced. The delay in manufacturing industry will also lead to sluggish demand for chemicals, which will affect the refining and chemical industry."

However, the current publicly available data can not reflect this effect. The import of crude oil and iron ore in January is basically an order in December 2019 or even before. The import data in February or even March can show the impact of China's basic industries.

Enterprises adjust production rhythm

"The contract limit of the big iron and steel company's iron ore contract is basically in line with market expectations. From the basic point of view, iron ore is weaker than steel and bifocal." Wang Yang Wen, an analyst at the S & P global Prof, told reporters that "from the current situation of spot iron ore in the port this morning, the transaction is relatively light."

She told reporters that most steel mills were stocked before the festival to fifteen in the first month, so there was no purchasing pressure this week. However, the serious shortage of motor transport capacity has become the most worrying problem for the purchasing department at present. The steam transportation from port to factory area is severely restricted, and some steel mills with high dependence on motor transportation may face the pressure of shutdown in late February. "At present, steel plants relying on railway transportation have not been affected." She said.

The above steel enterprises in an interview with reporters also agree with this judgment, and told reporters that the company has not stopped production signal, production is still in a normal running state. "If market demand is sluggish, products accumulate in large quantities and sales volume is affected due to insufficient capacity, subsequent adjustments may be made." He said.

For refineries, it is another scene.

Due to the current inventory volume, the production schedule of the Northeast refinery in February was only slightly down, but if the inventory is full, the production capacity will be adjusted later, including oil and chemical products.

"A good sign is that the number of newly diagnosed people across the country is decreasing day by day, except Hubei." The oil companies told reporters, "at the same time, the number of cured patients has exceeded the number of deaths, optimistic estimates of the epidemic or before the first fifteen months of the month to usher in a real turning point, I believe that for the market is a good news."

He said that we still have enough confidence in China's economic recovery ability. At the same time, because of the pulling of medical products such as respirators, some chemical products will usher in a wave of market. "And this time is a good time for imported crude oil, which is a good opportunity for national reserves." He said.