[Core viewpoint].
After the Spring Festival, the steel market did not feedback the "gold three silver four" expectations, in the context of low production and seasonal inventory indicators are basically normal, out of the past month, the DCE black commodity index fell by 2 in a single day9%）。Under the condition that the downstream demand has not yet been fully launched, the market is generally pessimistic about the terminal demand, mainly for two reasons:
After the real estate downturn, infrastructure projects have started slowly this year. Judging from the changes in the three core infrastructure indicators after the holiday, the space for infrastructure growth in 2024 may be limited, and the core is that under the pressure of local bonds, the effective funds for infrastructure are slow to arrive (the issuance scale of new special bonds in January and February fell by about 70% year-on-year);
2) Since the end of last year, the market has pinned its hopes on infrastructure to support steel demandThe policy of 12 key debt provinces and cities to standardize project documents is aimed at hitting market confidence. According to estimates, the scale of infrastructure project investment in 12 provinces accounts for about 26% of the country (2022), and the suspension of construction projects will indeed have an adverse impact on the intensity and pace of infrastructure investment.
Tips from a full-year perspective, 2024Infrastructure can still play an important supporting role: The growth rate of infrastructure investment is expected to maintain positive growth, and there is no need to be overly pessimistic. There are three reasons for this: 1).The National People's Congress passed the 24-year special bond quota (39 trillion) reached an all-time high, 24-year special bond approved in advance (228 trillion) top grid issued; 2）The projects in 12 provinces and cities are not all stopped, unrestricted infrastructure projects (livelihood projects such as the three major projects) will be able to bring incremental investment; 3）In March, the supply pressure of ** bonds was small, the loose capital side makes room for the amount of special bonds.
In the "New Normal of Infrastructure Investment in the Post-Epidemic Era" (article dated January 16, 2024, link: The growth rate of infrastructure investment in 2024** (Table 3) is: Under a positive scenario, the growth rate of infrastructure investment in 2024 (71%) below the 2023 level (8.).2%）。After the beginning of the year, the news of the 12 key provinces and cities standardizing the ** project, as well as the year-on-year weak progress of special bond issuance from January to February, are in line with the views of the previous article. In the market environment where the contradiction in steel fundamentals is not significant (the inventory is not weak compared with previous years, and the steel mills still have profits), it is necessary to maintain market determination. But it is suggested that in the process of moving from infrastructure investment to the formation of physical workload,It may affect the efficiency of the use of infrastructure funds and the speed of arrival due to the risk of local ** debt, which will cause certain obstacles to the formation of the physical workload of infrastructure
After major changes in the relationship between supply and demand in the real estate market, the black market's expectation of whether steel demand can recover has shifted to infrastructure demand. But 1).After the year, infrastructure construction started slowly(The following will be judged by the three core indicators of infrastructure construction after the holiday), superimposed 2).Documents on debt risk mitigation in key provinces (Circular No. 35 and No. 47) have weakened market expectations for infrastructure steel demandIn the context of low production and seasonal inventory performance, it is still out of the past month, and the DCE black commodity index has fallen by 2 in a single day9%。
1) From the three dimensions, the infrastructure start after the holiday is slow
Indicator 1: The resumption rate of engineering projects is weak.
As of February 28, 2024 (the 19th day of the first lunar month), Centennial Construction has surveyed the second round of resumption of work at 10,094 construction sites across the country (non-real estate projects account for 73%). According to the survey, the resumption rate of non-real estate projects in the first round was 129%, and the labor rate was 160%。The resumption rate of non-real estate projects in the second round was 415%, labor rate 384% (see Table 1 for details).
1) In the Spring Festival of 2023, a total of 12,220 engineering projects across the country will be investigated, under the same caliberThis year, the total number of construction sites decreased by 17% year-on-year
2) In the second round of construction statistics in 2024, the resumption rate of non-real estate projects increased by 28 month-on-month (compared with the first round).6% (The second round of statistics last year increased by 279%）；The labor rate was 384%, an increase of 22 month-on-month4% (the second round of statistics last year increased by 286%）。
Table 1: 2021-2024 Centennial Construction Survey Data on the resumption of construction sites across the country after the Spring Festival
Indicator 2: The direct supply of cement changes slowly before and after the Spring Festival.
The "cement direct supply" index provided by the centennial construction network refers to the amount of cement for key projects directly supplied, which can intuitively feedback the changes in the physical quantity of infrastructure in various provinces, so the direct supply of cement can be used as an observation index for the physical work of infrastructure.
1) Before the Spring Festival, in 2024, the month before the Spring Festival, the direct supply of cement will decline rapidly seasonally (Figure 2), with a decline rate of 244%, which is nearly double the decline rate of 109% in the same period of the Lunar New Year in 23.
2) After the Spring Festival, in the third week after the Spring Festival in 2024, the recovery rate of direct supply of infrastructure cement will be 1333% (1385% in the same period of the Spring Festival in 2023), a year-on-year decrease of 52 percentage points.
According to the performance of the two physical indicators, the start of infrastructure projects at the beginning of the year fell year-on-year, so it is judged that the start of infrastructure has slowed down year-on-year.
Indicator 3: The scale of new special bond issuance is weak.
As of February 25, the actual issuance of new special bonds was about 250 billion yuan (Figure 3), accounting for about 44% of the planned issuance scale in the same period (Table 2, 12 provinces and cities have been marked in blue). In the case of a high quota of special bonds, the actual pace of issuance is slow. At the same time, combined with the background of localized bonds (Figure 4), it is speculated that the issuance of special bonds in the first quarter may be slow, and the force may be delayed.
Table 2: List of new special bonds planned to be issued by provinces and municipalities in the first quarter of 2024
2) Document number document for debt risk resolution in key provinces) weakens the demand expectation for infrastructure steel
Since last year, the market has pinned its hopes on infrastructure to support the demand for projects, and the outflow of standardized project documents from 12 key debt-bearing provinces and cities has hit market confidence. The two documents roughly require Tianjin, Inner Mongolia, Liaoning, Jilin, Heilongjiang, Guangxi, Chongqing, Guizhou, Yunnan, Gansu, Qinghai, Ningxia, 12 high-risk debt provinces, to make every effort to resolve local debt risks and strengthen the management of investment projects. Before the risk of local debt is reduced to a low-to-medium levelStrictly control the best investment projects, strictly clean up and regulate the first-class investment projects under construction, and comprehensively suspend infrastructure projects. "In principle, the above-mentioned provinces shall not build new (including reconstruction, expansion and purchase) ** investment projects (including ** investment projects at all levels) in seven areas such as transportation and new infrastructure. ”
The scale of infrastructure investment in 12 provinces and cities accounted for about 26% of the country's total (2022).
Before the analysis, quantitative data is used to determine the approximate scope of the impact of the suspension of infrastructure projects in 12 key provinces and cities on the whole country.
Since the Bureau of Statistics no longer publishes the amount of infrastructure investment since 2018, the absolute investment in infrastructure in 2022 is estimated by multiplying the investment amount in the three main infrastructure industries (electricity, heating, gas and water, transportation, warehousing, and water conservancy and environment) in a broad sense in 2017 by the year-on-year growth rate of previous years. The result of the calculation of the proportion is obtainedIn 2022, the investment in infrastructure in the broad sense of the 12 provinces and cities accounted for about 26% of the country(Figure 5), narrow infrastructure (transportation and warehousing + water conservancy environment) accounted for 25%.
In 2023, the growth rate of infrastructure and fixed asset investment in most of the 12 key provinces and cities will be lower than the national level (Figures 6 and 7). Among the 12 key provinces and cities, 8 provincial statistical bureaus released infrastructure investment data for 2023. There is a large regional differentiation, among which the growth rate of Inner Mongolia and Liaoning is more than 15%, while Yunnan, Ningxia and Tianjin have obvious negative growth. Based on the weighted calculation of the investment volume of the three infrastructure industries in various regions, the infrastructure growth rate of the eight provinces and cities in 2023 will be 08%, significantly lower than the national infrastructure growth rate of 8 in the same period24% level.
Note: Inner Mongolia, Yunnan and Ningxia are the data from January to November, the national data are excluding the growth rate of electricity, heating, gas and water infrastructure, and the data of Heilongjiang, Guangxi, Guizhou and Qinghai are missing.
The broad infrastructure investment in 12 provinces and cities accounts for nearly 1 3 of the country's volume, and most of them are dragging down the growth rate of total fixed asset investment in the country.
To sum up the above two points, there is pressure on the effective funds (special bonds) of infrastructure to be in place, and the physical start indicators have been reflected. Coupled with the rumors in 12 provinces and cities that have hit confidence, the market is generally pessimistic about terminal demand when the downstream demand has not yet been fully launched.
But,In fact, the role of infrastructure support still exists。In 2024, the growth rate of infrastructure can still maintain positive growth, and there is no need to be overly pessimistic. There are three reasons for this:
In 2024, the growth rate of infrastructure can still maintain positive growth
Reason 1: The 24-year special bond quota is the highest in history.
On March 5, the two sessions announced that the total amount of new special bonds in 2024 will be 3900 million, the highest amount in history (Figure 8), it can be seen that there will be a certain scale of special bond funds, one of the main infrastructure funds, in 2024. In addition, in 2024, local bonds were approved in advance, and 60% of the fixed quota of general bonds and special bonds was used in the previous year, and the amount of new special bonds approved in advance was 2.28 trillion yuan, which is also the highest in the history (Figure 9).
Figure 8: The amount of new special bonds in 2024 will hit a record high (100 million yuan).
Reason 2: The projects in 12 provinces and cities are not all stopped, and unrestricted infrastructure projects (livelihood projects such as the three major projects) will bring some growth.
The projects in 12 provinces and cities are not all stoppedBasic livelihood projects such as water supply, heating, and power supply are not subject to document restrictions and can still continue to be constructed. The Measures for the Management of Key Provincial Classification and Strengthening Investment Projects (Trial) (Guo Ban Fa 2023 No. 47, referred to as Circular No. 47) mainly restricts the areas of ** investment projects in 12 key provinces and cities, except for public welfare infrastructure investment projects on the national economy and people's livelihood, public safety, and basic livelihood security, which are included in the prohibited list. However, high-standard farmland, three major projects, gas, drainage, water supply, heating and other projects are not included in the scope of the prohibition.
It is recommended to pay attention to the "three major projects" of policy priorities:The renovation of urban villages and the construction of affordable housing in the "three major projects" have been included in the special bond declaration projects that will be added since 2023, and have not been included in the prohibited scope of investment projects in 12 provinces and cities
In the "Notice on Further Strengthening the Review and Control of Local ** Special Bond Projects and Improving the Management Level of Special Bond Projects" issued by the state in May 2023, it is clear that the application for special bonds will be organized three times a month. The first application for the 2023 special bond project is October 18, 2022, and the deadline is November 16, 2022, so the official declaration of the 2024 special bond will start from mid-October 2023 based on historical experience.
In 2023, compared with the 2022 special bond investment areas (subdivision projects of affordable housing projects), the "three major projects" of urban village renovation and affordable housing will be added on the basis of old renovation and shantytown reform. As the key areas of policy for economic growth, the "three major projects" will bring a relatively obvious increase in infrastructure growth.
Reason 3: The expected supply pressure of ** bonds in March is small, and the loose capital side makes room for the issuance of special bonds in March.
Although the issuance of local bonds in January and February was slow, it also indicated that the supply shock of the bond market had weakened, and the interbank market was relatively abundant. According to brokerage estimates, the net supply of treasury bonds in March was about 120 billion yuan (more than 800 billion yuan due to maturity). And it is expected that the net issuance scale of ** bonds in March will be about 560 billion to 630 billion yuan, a decrease of about 500 billion to 120 billion yuan from the previous month. Therefore, the market's demand for liquidity care may be weak, which will make room for the peak of special bond issuance in March.
In 24 years, the growth rate of infrastructure investment fell year-on-year, but the increase was considerable
In "The New Normal of Infrastructure Investment in the Post-Epidemic Era" (article dated January 16, 2024), the team has made a survey of the growth rate of infrastructure investment in 2024** (Table 3): under a positive scenario, the growth rate of infrastructure investment in 2024 (71%) below the 2023 level (8.).2%）。After the beginning of the year, the news of the 12 key provinces and cities standardizing the ** project, as well as the year-on-year weak progress of special bond issuance from January to February, are in line with the views of the previous article. In 2024, when infrastructure construction will maintain positive growth, and the contradiction in steel fundamentals is not obvious (inventory is not weak compared with previous years, and steel mills still have profits), there is no need to panic excessively and maintain market determination.
But it is suggested that in the process of moving from infrastructure investment to the formation of physical workload,It may affect the efficiency and speed of the use of infrastructure funds due to the risk of local ** debt (Figure 4), which will cause certain obstacles to the formation of physical infrastructure workload. And according to the data of the Centennial Construction Network, the payment collection rate of cement merchants in all regions of the country in February was less than 60%, a year-on-year decrease of 3%-33% compared with February 2023 (Table 4).
Table 3: Infrastructure investment estimates in 2024: investment growth rate is about 71%。
Data**: Ministry of Finance, Mysteel, MFM independent calculations.
Table 4: Comparison of February 2023 and 2024 (%) of the collection rate of sample cement merchants in each district of the country