China may shut down excess steel capacity?

Discussion in 'Ask A Query About Your Stock Picks And Portfolio' started by kharb, Jan 22, 2016.

  1. kharb

    kharb Well-Known Member

    Aug 15, 2015
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    Will Chinese govt shut down excess unefficint steel plants to reduce pressure on steel prices? Probably yes and it seems good time may not come for Steel industry in hurry but worst may pass slowly .So who knows steel stocks are making bottom.?
  2. darth

    darth Active Member

    Dec 9, 2015
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    An earlier post from me....

    from time-to-time, it’s worth sitting back and looking at the big picture; the long-term; over-the-horizon. It’s a useful thing to do. It provides some perspective.

    Considering the global steel output since 1950 we can look at 3 cycles.

    1950-73 – steady growth. Post-war investment in North American infrastructure; the development of the automobile; reconstruction in Europe and the emergence of Japan. All drove steel production and consumption higher.

    1973-98 – stagnation. The oil shock; light-weighting in cars, packaging, construction and increased efficiency. The end of investment in Europe and North America led to demand falling and only partially offset by the growth in emerging Asia.

    1998-2014 – the emergence of China. A country of 1.4bn people industrialised and moved from the country to the city; a development model specifically based on steel-intensive capital investment.

    ...... And now?

    The first two cycles lasted 25 years; the last one has been 15 years.

    Europe, North America and Japan (25% of global steel consumption) are mature consumers where steel consumption will perhaps grow 1% over the longer-term, and even that is under threat from aluminum in the automotive industry and lightweighting and efficiency elsewhere.

    China (50%) has peaked. Construction is 70-80% of demand and that is a one-off use of steel. Once cities and roads are built, they don’t need to be renewed for a while. Steel consumption has peaked and could fall by 20% from here over the next decade.

    Emerging economies (25%) were expanding, but in many cases, they were investing the super-profits of commodity gains from oil, metals and agriculture — from China. Without that bulwark, capital expenditure may plummet.

    That means we could be in for a long period of stagnation and decline — 15-20 years based on previous cycles
    San8422 likes this.
  3. Guru Vachaal

    Guru Vachaal Let's discuss the fundamentals..

    Apr 3, 2015
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    Even that will also be seen as a negative because restricting the steel production will have a bad impact on China's total revenue. Which will again slow down their growth and then global markets will become even more bearish.
  4. w4wealth

    w4wealth Well-Known Member

    Oct 16, 2015
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    i think steel prices may remain low for near future. investing in steel companies will not be good idea. is that right friends??
    San8422 and Guru Vachaal like this.