It is expected Venezuela and China agreement could help Venezuela situation in 2017

It is well known that the Venezuela status is becoming worse and worse, due to the oil and gas price keeps going in a low level in the last few years. Venezuela situation in 2017 is going into a freeze point. People in Venezuela are facing the pressure from different sides, food, poor, safety, and violence. Before this agreement, China already loan Venezuela $50 billion, it has been extended several time again. Now this behavior from China government may be not understand by most of China people, but it is hoped that this behavior will provide little bright and help to the innocent people in Venezuela.

Background: Venezuela want more cooperation with China

Venezuela, the country that rely on oil and gas exports, has turned to China for help several times. Venezuela and China have a good relation since long time ago.
In the current oil crisis, Venezuela has been unable to return the $50 billion debts to China. China decided to extend the deadline of $ 50 billion loan. In order to achieve better cooperation plan and get out trouble, Venezuela finance minister Marco was coming to China several time to seek more emergency financing.

The Japanese media reports that US Department of Commerce consider that a large number of imported steel products: oil and gas steel pipe, hot and cold rolled steel coil, and other products have make a threat to national security, President Trump plans to take measures to change the bad condition recently.

US will restrict imported steel from Japan

If the United States take plans into action, the United States will restrict imported steel from Japan. This plan may lead to global trade reduced, the economy will also have a bad impact.

Report said Trump have ordered to investigate imported steel products which damaged to national security and made a report. This action is because of fear that a large number import steel will have bad effects to The US steel companies. And impact the national defense products making. Ross led the investigation and emphasized that “report will be finished soon.”

According by The US policy, that if the import steel products make a threat to national security, the President may take corrective action according to the suggestions of the Ministry of Commerce. Rose said that a large number of imported steel “should consider as the national security issues. The US president will suggest to take corrective measures”. The options include charging high tariffs and other measures.

The US imported steel restriction opposed by other party of WTO.

After receiving the suggestions of the US Department of Commerce, Trump will decide whether to take action. However, import restrictions and high taxes based on US domestic law may be violated The World Trade Organization (WTO) rules, it will be claimed by the involved countries. Although United States may take these hints, forcing the other countries to cutting export steel itself.

According reports, The United States imported steel of 3.1 million tons in March this year. Increased of 25.6% than the last month. In April, imported more than 3 million tons. Most is Canada steel amount is close to 16%, then Russia, South Korea, Brazil, and Japan. China which have excess capacity problem has only accounted for 2%. The US steel production is about 7 million tons per month.

On the other side, Japan export steel to US is about 2 million mt annually, at 2% of US annual production capacity.

Government of Trump is try to activate the previously policy. Trump have signed two executive policies on April 1st, 2017. The policies demanding to investigate the US trade deficit and dumping steel policies from other Countries.

Dumping steel includes steel plates, steel line pipes, and steel profiles.

According the reports Axios, the current of White House have inside disagreements on trading policies plan. But still there were news for this:

Steel products such as line pipes, steel plates, steel profiles, casing pipe and tubing, and aluminum will be the target dump steel product, other commodities such as household appliances, may also become the target products. If the survey resulted in tax increase, this possibly increase the American consumer’s price. And it’s harmful to partial US company’s share price, especially the companies rely on Chinese cheap steel products. But for some US manufacturing company may have the benefit for this.

US Try to save American manufacturing industries and turn the business around.

Trump will save American manufacturing industries and turn the business around, for the unfair trade action. A White House official said this is a part of actions. US government will take actions according by the survey result. The official said US government may not reflect for this, but also maybe will charge the additional tax.

In other words, the action will possibly much bigger than steel products dumping content reported from New York Times.

At present, US Secretary of Commerce is implementing this policy. The survey result will come out at the end of April possibly.

The penalty to dumping steel will make big benefit for some US companies.

Axios said that if this investigation lead to a penalty to trade partners, it will be the great success for Ban Nong, Miller and other economic nationalists. On the other hand the Glodman Sachs is possibly to oppose these trade penalties.

China exported steel products reduced 26% than the same time last year

From January to March, China has exported steel 20.2 million tons worldwide, reduced 26% than the same time of last year (27.3 million tons). For finished steel products exported quantity at 18.8 million tons, other semi-finished steel products 1.4 million tons. Meanwhile, Latin America imported 1.9 million tons steel from China. It increased 8% than the same time of last year. Which finished steel 1.7 million tons, other products 0.19 million tons.

Major exported region in Latin America

The first quarter of 2017, Chinese steel the major export region is Central America, 0.388 million tons (reduced 2% than the same time of the last year). Chile 3.49 million tons (increased 36%) and Peru 2.97 million tons (increased more than 26%).

The Average price of Chinese exported steel products

The region imported steel amount same with 1.111 billion dollars, with average price of 580 USD/TON, 33% higher (436 USD /TON) than 2016.
Some place of the region import price lower a lot than other regions of the world. The most affected region is Central America (the average price is 499 USD/TON), 19% lower than the average of the other regions), Peru (the average price is 518 USD/TON, 15% lower) and Costa Rica (527 USD/TON , 14% lower than the rest of the world).

The fixed assets investment continually increasing

According to data released by the national development and reform commission, 18 fixed assets investment project has been approved in January, involving 153.9 billion CNY of total investment. The cumulative growth rate of investment in construction was 10%, up 0.9% from previous month, rather than reduced as usual. The data showed that fixed assets investment was still increasing. In our field research, we found that railway construction started early after spring festival. The project progress also accelerated.

The steel demand top in March 2017

From supply and demand of steel market, the steel demand peak is still in March. In the field research, many steel enterprise have already got the orders for 2017, such as carbon steel plate，reinforced steel rebar and other orders They have enthusiasm to produce and stock steel product. By February 10th, the domestic social inventory of steel rebar was 8.08 million tons, up 46.28% before the spring festival. On the one hand, the steel enterprise transfer steel product inventory to traders. On the other hand, the steel traders express optimism for later steel demand, and willing keep the inventory. Steel product inventory do not rise significantly. By the end of January, steel product inventory was 14.15 million tons, 14.95% higher than before spring festival. Because the inventory was not too high, so the steel enterprise want to keep steel price rather than sell steel product at low prices.

Steel enterprise adjust own procurement policy while ore price changes

A part of steel enterprise resumed production. With the iron and steel ore inventory of steel enterprise reduced, the purchasing power of steel enterprise will increase. At present, iron and steel ore price have improved. Because the probability of large increase in iron and steel ore, steel enterprise should adjust their own procurement policy.

Chinese steel products price increased because of the reducing capacity policy.

Cut steel capacity still have a long way to go. And because of the reduce of the steel capacity, China steel products like carbon steel plates, carbon steel pipes and steel profiles get popular again. From National Bureau of Statistics data, the first two months of this year, coal mining price rose an average of 39.0%, compared the same time last year. Benefit from price rise rapidly for coal and steel products, Chinese steel manufacturers profits improved greatly. The first two months of this year, coal mining industries get over the loss status and made profits 43.8 billion CNY. Ferrous metal and rolling processing industry total profits increased 21.1 times than last year.

It is a hard work to cut steel capacity for Chinese steel products.

As the steel market situation improved and price rise again, new problems happen during the process of cutting steel capacity. Some places and companies hold the move to wait and see how is the policy going. Other companies didn’t have too much passion on it. Therefore, it is a hard work to reduce the production capacity for steel products.

Iron and steel products still overcapacity

Although it was successful last year for reducing production capacity, but there is still a long way to go. At present, iron and steel products, coal industries keep in a status of overcapacity. Oversupply pattern have not change basically, industry capacity utilization has not rebound to normal levels. Once reducing capacity work in a lower speed, the industry will go down to the bottom again. Bad market will be shown again like two years ago, price reduced a lot, company had a big loss. So we shall have much more confidence and determination on cutting capacity.

Latin-America import 7.4 million mt at 2014, increased a lot than 2013.

According the data from Latin-American Steel Association, from January to November of 2014, China have exported steel products over 7,400,000.00 mt to Latin-American, this have increased 56% compared 4,800,000.00 mt in 2013.

Slowly increases at 2015 and 2016 on importing China steel in Latin-America.

In Jan/Nov 2015, China exported finished steel at 92.8 million mt, and 7.6 million tons were exported to Latin America. It grew 2% compared with the same period from Jan/Nov 2014.

In Jan/October 2016, with the same period of 2015, Latin American Steel Association claimed China steel exported increased by 1%. The figure included steel profiles, steel plates and coils, seamless line pipes and also steel wire products reinforced steel and welded pipes. Till then, Latin America is the third place that export steel, first is South Korea 12.1 million mt and Vietnam 10 million mt.

Main destination countries for Chinese steel products in Latin-America.

The main destinations for the China finished steel products and steel pipes, profiles from January to October 2016 were Central America 1.6 million mt. Chile 1 million tons, Peru 850 thousand tons. For Central America, the countries that increase the import steel from China is Peru increased 4%, Costa Rica increased 130%, other countries increased 13%. On the other hand, some Latin America countries reduced imports for Chinese steel products. For Jan/Oct 2015 to Jan/Oct 2016, Mexico and Venezuela reduced 54%. Argentina reduced 47%. Ecuador and Brazil reduced 36%, which respectively shares 3%, 7%, 1%, 11% and 5%. 49% of the Chinese steel products imported by Latin America for Jan/Oct 2016 were flat steel products. Flat steel products includes steel sheets, steel plates, steel coils, steel strips, total about 3.1 million mt.

More and more private enterprise work with CNPC and Sinopec

China National Petroleum Corporation （CNPC）cooperate with private enterprise on oil and gas pipeline for the first time. The project will greatly enhance China’s oil and gas market status and influence. It can optimize the energy structure, and improve the ecological environment. More and more private enterprises will sign forwarding agreement with CNPC and Sinopec, so that promote the reform process of oil and gas market.

The natural gas will become the third major energy source after coal and oil

Natural gas market reform is continuously accelerating without any obstacles. In the forum on energy transformation, the forum focus on the natural gas market reform. In the process of energy transformation, the proportion of natural gas and other clean energy will continue to increase. By the end of the 13th five years plan, natural gas will account for 10%-15% of China’s primary energy consumption. And the consumption proportion can reach to 15% by 2030. Thus natural gas become the third major energy source after coal and oil. We should adhere to the direction of market reform, and mobilize the all parties’ enthusiasm to develop oil and gas resources, national energy bureau deputy director said.

China’s oil and gas market reform

With the belt and road initiative deepening, oil and gas market will become the inevitable reform, such as the interconnection of oil and gas pipeline, the separation of pipeline transportation, the connection of pipe network and LNG terminal.

Steel product price displayed a rising trend

In the data, the whole steel product price displayed a rising trend since 2016. As of October 21^st, the steel product composite price index rose 19.17 to 79.00. The key steel product price, such as high line, deformed steel bars,  hot rolled coil plate, respectively rose 27.4%、27.9%、44.9% year on year. The whole level of steel inventory was lower than last year. According to statistics, China main social steel inventory dropped 8.3% to 9.4 million tons year on year by the end of September. It increased 0.79 million tons at the beginning of the year, an increase of 9.2%. As the weather turns  cold, the fourth quarter of the steel product market gradually into the off-season demand. Social steel inventory will rise, but the whole level will be lower than last year.

Raw material rapid rose influence benefit of steel plate manufacturer

It was worth noting that the raw material phased price rose too fast to influence the profit of steel plate manufacturer. According to statistics, as of October 14, coking coal and metallurgical coke prices rose by CNY 507 and 849  per ton, up 81.4% and 126.2% from the beginning of the year. At the same time,  an increase  was 36.1% for steel price.

The government provide better support for steel plate manufacturer

In order to strengthen and enlarge a better trend of steel plate manufacture, the government will focus on  three aspects  work:

First, to deal with the relationship among steel capacity, structure adjustment and transformation promotion.

Second, to create a fair and orderly steel product market environment.

Third, to follow and analyze the price trend of steel plate manufacture, strengthen the prediction and prejudgment, ensure the steel plate price stable at a reasonable range.

Increasing China steel product export makes opposition from Europe

“The Financial Times” said China steel export increased a lot, it makes the big opposition from Europe to China steel product, But granted China to export steel products to worldwide, was the agreement from WTO, when 15 years ago China joined it. Since China get this power, it is hard to opposite China from world wide countries.

European Union Commission Chairman Juncker stated, the agreement would allow “verification and monitoring” to China steel products such as steel plates, pipes, profiles from China. This is to confirm whether China has keep promise to cut excess steel capacity.

Connections between the Agreement and Economy Status

“Our Chinese friends and partnerships known, that economy status and this agreement have some kind of relations between each other,” Juncker said. “Although you can take apart each other, but literally European should consider them as one.

A discussion if to support China Economy

Addtionally, the European Commission will discuss whether to give the support to China Economy. “I don’t want to expanse the decision, but it will be an noticeable decision. and there is an apparent connection between the steel market and economy status.

It is said that this is an extempore negotiation for this agreement, among Jucker, Chinese Premier Li Keqiang, and the European Council President Tusk. This negotiation suppose to make a diplomatic victory to Beijing, and good news to China steel product and China steel manufacturers.