Some things about steel trading in metal futures

Steel trade is the mainstay of the bridge between steel production and consumption, and the things behind trade often affect and control the market.

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A blindfolded bank

20 15 Mr. Huang, who was born in Putian, Fujian Province and settled in Shanghai when he grew up, submitted applications for commercial housing mortgage loans to a number of banks in Shanghai, but all of them were refused loans. After graduating from university, Mr. Huang worked for a well-known information technology company in Shanghai. His personal loan repayment ability is good and he has no bad credit record, but the bank refuses to lend. This puzzled Mr. Huang, so he got up the courage to find out. To his surprise, the reasons for refusing the loan in the bank's oral reply were strikingly similar: the three-digit number of his ID card was 350 in Fujian Province, and the bank suspended the loan application of Fujian people on the grounds of credit risk. What Mr. Huang, with a blank face, doesn't know is that the aftermath of the credit crisis of steel traders broke out in Shanghai a few years ago is still there, and he has become an innocent victim of being stabbed in the back.

This credit storm should have started with the global financial crisis in 2008. After the financial crisis broke out, in order to cope with the crisis, China adopted a loose monetary policy to stimulate the demand for real estate and infrastructure construction, which is unprecedented for the steel industry, and the business of steel traders is also in full swing. Because steel traders need to pay the deposit in advance when ordering from steel mills, and pay the full amount when picking up the goods, and the payment is slow after selling to downstream users, steel trade needs a lot of liquidity and a large demand for loans. In order to win more loans for steel traders and expand their sales scale, a large number of Fujian-based traders hold groups to protect each other and apply for loans with the "joint guarantee system" that bears credit risks. The bull market in the steel market has also weakened the credit risk awareness of banks. Fujian steel traders have become guests of the bank, and even a Fujian ID card can easily get a loan of 500,000 yuan from the bank. Warehouse receipt pledge financing is more chaotic. False warehouse receipts, false transactions of "replacing trees with flowers", repeated promises of "one woman marries more" frequently appear, and even hot-rolled coils of cement "replacing plums with peaches" appear. Many steel trade enterprises misappropriate funds to real estate and minerals, futures stocks, private pawn loans and other risk areas through related transactions. The steel trade credit bubble gradually appeared and expanded, reaching its peak at 20 1 1.

Since the second half of 20 1 1, the macroeconomic situation has turned to a turning point, the credit policy has turned to tighten, and the discount rate once reached 14%, and many steel traders' capital chains have fallen into tension. 20 12, 1, a legal person in Wuxi steel market fled and became a needle to puncture the bubble. At the time of the avalanche, no snowflake was innocent, and banks instinctively began to shrink credit. The disadvantages of the joint guarantee system are exposed together with the evil consequences of mortgage cashing, and the bad news of steel traders such as "running away", "bankruptcy", "bad debts" and "accountability" continues. As the prosperity receded, the bank turned from "loving each other" to "killing each other" for Fujian businessmen, and also "wrongly killed" innocent people like Mr. Huang. This incident has had a great impact on the spot trading of steel and rebar futures at the capital level.

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According to incomplete statistics, due to the bursting of the credit bubble of steel trade in 20 12, the number of steel traders in the southern market, represented by Shanghai, decreased by almost half, and the number of steel traders in the northern market, represented by Beijing and Tianjin, decreased by nearly 30%.

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The never-ending battle of steel trade

200 1 After China's successful entry into the World Trade Organization (WTO), China's commodities have obtained more favorable export conditions in the major global markets than in the past. After China achieved self-sufficiency in steel and steel products, some steel products also turned to export. The low cost of steel production in China has caused great competitive pressure on steel mills or steel production enterprises with high production costs in some export areas. Under pressure, these steel mills or manufacturers protested to their governments, demanding that anti-dumping and countervailing investigations be launched on China's steel products by using the relevant agreements of the World Trade Organization. This is a "double-reverse" investigation. If anti-dumping and countervailing duties are established, high anti-dumping duties or countervailing duties will be imposed on steel or steel products originating in China, which will make their exports lose their due competitiveness. After receiving the "double opposition" investigation from China, the steel mills or manufacturers involved can lodge complaints, but the general effect is very small (see the table below).

Table China Iron and Steel Company encountered "double opposition" investigation times.

Unit: from

Source: Ministry of Commerce of China.

Since 2004, when Canada initiated the "double-opposition" investigation on China steel barbecue grill for the first time, the investigation on China steel and steel products has never stopped. Among them, most of them were investigated by the United States and the European Union under the cloak of "double opposition" in law, with the substantive purpose of raising trade barriers and strengthening trade protection, especially in the face of greater economic pressure. For example, the global financial crisis in 2008 and the 20 13 European debt crisis led to a significant increase in the investigation of products such as Sinosteel.

With the increasing demand for steel in Southeast Asian countries, Southeast Asia has become the main export growth place of China's steel and steel products, so the negative impact of Europe and the United States on China's steel exports is gradually weakening.

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By the end of 20 18, China has been the country with the largest number of anti-dumping investigations in the world for 24 consecutive years and the country with the largest number of countervailing investigations in the world for 13 consecutive years.