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Will the economic crisis come? What's the future of refractories?
Zhengzhou huixinlong refractory
At the beginning of 2020, the outbreak of new coronavirus suddenly caused immeasurable losses to China's economic development. From the outbreak to the control of the epidemic, China has only spent three months, and is currently engaged in rapid economic recovery. However, the situation abroad is not optimistic. The epidemic has spread in many countries in Europe and the United States. Global panic has intensified. Oil prices have fallen sharply. U.S. stocks have broken for many times. European stocks are also not optimistic. All kinds of signs can't help but remind us of the situation when the economic crisis broke out in 2008. Is the global economic crisis in 2020 already coming?
China's economy under the influence of 2008 economic crisis
Looking back to 2008, the 158 year old Lehman Brothers holding Inc. filed for bankruptcy, which triggered a chain reaction that led to chaos in the credit market and triggered a global financial tsunami. At that time, China was implementing macro-control characterized by "tightening" in response to the economic overheating since 2007. The financial crisis spread to all economic fields of the country like the domino. In a short period of one or two years, China's economy experienced a big fluctuation. In the first quarter of 2009, China's economic growth fell to 6.6%, and the growth rate of import and export was negative. A large number of enterprises closed down or cut production.
Figure 1 GDP change in 2008-2009
As can be seen from the figure, affected by the economic crisis, GDP in the first quarter of 2009 was significantly lower than that in the fourth quarter of 2008.
As can be seen from the figure, affected by the economic crisis, GDP in the first quarter of 2009 was significantly lower than that in the fourth quarter of 2008.
The growth rate of China's refractory industry slowed down sharply, almost negative
China's refractory industry is not immune either. According to the statistics of China Refractory Association, China's refractory output in 2008 was 24.17 million tons, and that in 2009 was 24.53 million tons, with a year-on-year growth of only 360000 tons, an increase of only 1.49%, which has a great impact.
Figure 2 price trend of bulk refractory raw materials
It can be seen from Figure 2 that the price of domestic bulk refractory raw materials has declined sharply since September 2008, and the time node is consistent with the time when the global financial crisis broke out. In particular, the price of silicon carbide, white corundum and brown corundum decreased the most obviously, and they basically kept at a low level in 2009, and the highest price of the whole year was not higher than that in 2008.
In 2008, China Refractory window launched the refractory material price index data, which reflects the development trend of China's refractory industry through the index, and the change of refractory material price index is basically consistent with the development of the world economy. As can be seen from Figure 3, the refractory material price index began to decline significantly in September 2008, and then went down all the way It was only in the fourth quarter of 2009 that there was a slight upward trend.
Figure 4 change trend of China's refractory production in 2005-2018
Four trillion investment to save the market
In response to the crisis, the Chinese government launched ten measures in November 2008 to further expand domestic demand and promote steady and rapid economic growth. According to preliminary calculation, the implementation of these ten measures will require an investment of about 4 trillion yuan by the end of 2010. With the passage of time, the Chinese government has constantly improved and enriched the policy measures to deal with the international financial crisis, and gradually formed a package plan to deal with the international financial crisis.
After 2009, China's refractory industry has also entered the channel of rapid development. Under the stimulation of a series of national economic policies, China's refractory production has increased significantly. In 2010 alone, it increased to 28.08 million tons, an increase of 3.55 million tons compared with 2009, an increase of 14.47%.
At the same time, as an important raw material for economic infrastructure construction, the downstream pig iron, crude steel, flat glass and cement industries of refractories also saw a relatively significant growth, as shown in Figure 4,
Figure 5 production changes of pig iron, crude steel, flat glass and cement in 2007-2012
After the financial crisis in 2008, the global industrial chain was reshaped, and China accelerated its integration into the global trading system with obvious comparative advantages. At the same time, under the stimulation of 4 trillion investment and "ten major industries revitalization plan", the domestic economy has experienced a new round of rapid development, and the proportion of GDP in the world has also increased rapidly. In 2008, the GDP reached US $4.60 trillion, accounting for 7.23% of the global GDP. By 2018, the GDP reached US $13.46 trillion, and the global share increased to 15.95%, becoming the second largest economy in the world. The refractory industry also developed rapidly, reaching a production of 29.49 million tons in 2011, a peak in ten years.
What will be the impact of the new economic crisis?
In 2020, the new coronavirus epidemic swept the world. On March 10, the U.S. stock market opened, the Dow Jones index of the U.S. plummeted about 2000 points, triggering the circuit breaker mechanism. Subsequently, the U.S. stock triggered the circuit breaker mechanism several times in succession, and the impact of the U.S. stock downgrade has even exceeded the U.S. subprime crisis in 2008.
The spread of the epidemic has also had a serious impact on China's economy. According to the data of the Bureau of statistics, from January to February 2020, the added value of China's industries above Designated Size actually decreased by 13.5% year on year (the growth rate of the added value below is the actual growth rate after deducting the price factor). From a month on month basis, in February, the added value of industries above designated size decreased by 26.63% over the previous month.
From January to February, China's fixed asset investment (excluding farmers) was 3332.3 billion yuan, down 24.5% year on year. By sector, investment in infrastructure fell by 30.3% year-on-year, investment in manufacturing fell by 31.5%, and investment in real estate development fell by 16.3%. By industry, investment in the primary industry decreased by 25.6%, investment in the secondary industry decreased by 28.2%, and investment in the tertiary industry decreased by 23.0%.
China's refractory industry under the epidemic situation
China's refractory industry has also been seriously affected. According to statistics of China's refractory window network, as of February 29, more than 80% of the refractory enterprises have started their business as a whole, and the capacity utilization rate is less than 50%. However, it has been able to meet the production demand of downstream steel, cement and other industries, and there is no situation that the production of downstream enterprises is affected by the disconnection of refractory materials. Fundamentally speaking, the insufficient capacity release in the current Metallurgical Building materials industry is the main factor affecting the operating rate of refractory enterprises. But nearly 80% of the refractory enterprises are pessimistic about the production and operation of the company in 2020. Under the influence of the epidemic, the cost of logistics, management and epidemic prevention of the enterprise increases, and the business development is limited, which will greatly affect the profits and revenue of the enterprise.
Figure 6 price trend of bulk refractory raw materials from January 2018 to February 2019
Figure 7 price index trend of refractory raw materials from January 2019 to February 2020
It can be seen from Figure 7 that since 2019, the price index of refractory raw materials has shown a downward trend as a whole. In January and February 2020, the price index of refractory raw materials has also continued to decline. In addition to the impact of the epidemic, products such as magnesia are also subject to their own large inventory.
Although the epidemic is serious, iron and steel and other industries are related to the foundation of national economy and people's livelihood. Therefore, in the past two months, enterprises are also operating at a high speed. According to the data of the Bureau of statistics, the output of pig iron and crude steel in China increased by 3.1% year-on-year, and the output of flat glass increased by 2.3%. The cement industry is in the off-season of demand, coupled with the impact of the epidemic, the output has declined significantly, a drop of 29.5%.
Table 1 output of downstream refractory industry in China from January to February 2020
The government's efforts to restore the economy far exceed those of 2008
After the outbreak, the Chinese government actively organized relevant epidemic prevention work, January 25, the first day of the first lunar month. Xi Jinping, general secretary of the CPC Central Committee, chaired a meeting of the Standing Committee of the Political Bureau of the CPC Central Committee to make a comprehensive plan for strengthening the prevention and control of the epidemic. It was decided at the meeting that the CPC Central Committee should set up a leading group to deal with the epidemic situation and carry out its work under the leadership of the Standing Committee of the Political Bureau of the CPC Central Committee. The Central Committee of the Communist Party of China sent guidance groups to Hubei and other areas with severe epidemic situation to promote the relevant local governments to comprehensively strengthen the front-line work of prevention and control. Under the leadership of the Party Central Committee and the government, it took only three months for China to control the epidemic. Subsequently, the relevant departments of the state and the governments at all levels actively issued relevant policies to promote the resumption of production and work of enterprises, so as to ensure the rapid recovery of the national economy.
The Standing Committee of the Political Bureau of the CPC Central Committee held a meeting on March 4, at which it was pointed out that we should increase investment in public health services, emergency material support, and speed up the construction of 5g network, data center and other new infrastructure. We should focus on mobilizing the enthusiasm of private investment.
Industrial Internet is the foundation of intelligent manufacturing development, which can provide common infrastructure and capabilities. The first is the basis of industrial manufacturing, including advanced technology, materials, technology and manufacturing capacity; the second is the basis of networking and digitization, which connects equipment, products, customers, business processes, employees, orders and information systems into a network, collects data through the network and analyzes them, and the relevant results are used to improve production efficiency and reduce resource consumption.
At present, in addition to large-scale enterprises benefiting from the improvement of quality and efficiency brought by the industrial Internet, the voice of small and medium-sized enterprises to transform the industrial Internet is also growing. For the refractory enterprises, they should pay more attention to the market information service, logistics service and the opening of online sales channels of the refractory industry. The enterprises usually need to operate in multiple modes to prevent troubles before they happen, and to prepare for everything before it happens. In the future, the industrial Internet will play a role, "digitalization" will become a new production mode, and the purchase, production and sales of enterprises will be transferred from offline to online.
Premier Li Keqiang presided over the executive meeting of the State Council on March 17. The meeting stressed that it is important to promote the resumption of major investment projects as an important part of stabilizing investment and expanding domestic demand, to help solve the problems of employment, supply of raw materials, funding and epidemic prevention material guarantee in the construction of major projects of all kinds of ownership, and to promote the construction progress of 11000 key projects under construction in all regions 。 We will speed up the issuance and use of special local government bonds issued in advance in accordance with regulations, speed up the issuance of central budget investment, and urge efforts to do a good job in the preliminary work of more than 4000 key projects planned to start this year, and strengthen the reserve of follow-up projects. Green channels shall be set up for approval of major projects, so as to start construction as soon as possible.
The future of refractory industry in Post Crisis Era
Under the influence of the epidemic, the global economy has declined. Even if there is a new economic crisis, I believe that under the leadership of the Communist Party of China and the orderly organization of the government, China's economy will burst out with new vitality of economic growth and embrace a better future on the basis of new infrastructure.
First of all, the proportion of GDP in the first quarter is relatively small, and it will be significantly better than that in January February under the stimulation of various national policies in March. As the effectiveness of domestic epidemic prevention and control continues to show, the process of resumption of work and production will be accelerated, the normal production and living order of the people will be restored, and the impact of the epidemic will continue to weaken. At that time, China's GDP in the second quarter will have a significant recovery, that is to say It is said that the impact of the epidemic on China's economy is short-term and will not change the fundamentals of the overall improvement of China's economy.
Secondly, the impact of the epidemic will also make global investors reconsider the importance of the investment environment. In addition to stable investment policies and free flow of capital, we should also consider the importance of public security, that is, the ability of the government to respond to the public security crisis. There is no doubt that China can almost get full marks in this project. It is likely that after the outbreak, the global industrial chain and funds will be transferred to China. The out of control epidemic in Europe and the United States is bound to cause a heavy blow to the economy. In the context of a sharp reduction in demand, there is still a great possibility that demand from outside China will shift to China as a safe place!
Thirdly, more than 70% of the refractory products mainly flow to the iron and steel industry, with the dual influence of market and policy. Many domestic steel enterprises are implementing cross regional, cross provincial and cross ownership merger and reorganization, seeking greater, more stable and further development space. According to the statistics of refractory window, there are nearly 200 steel projects under construction in China in 2019, such as steel capacity reduction, replacement, transformation and upgrading project of Tangshan Yanshan iron and Steel Co., Ltd., relocation project of Hebei Huaxi iron and Steel Co., Ltd., intelligent upgrading and transformation project of medium and heavy plate production line of stainless steel hot rolling plant of Shanxi Taigang Stainless Steel Co., Ltd. and so on. The start of these projects will be The consumption of refractory products provides a sufficient demand market.
As the foundation of high-temperature industry, China's refractory industry will not only need the strong support of refractory industry, but also bring new development opportunities for refractory industry.