Steel and coal industry to production task, the market price may rise in local governments and enterprises will weaken. There are also the pressure of excess capacity, shipbuilding, petrochemical, non-ferrous materials and thermal power industry. Coal, iron and steel industry in 2017 is expected to total production capacity in 2016 is to range from iron and steel, coal production capacity is expected to expand to two industries, iron and steel, coal, cement, electrolytic aluminum and glass, shipbuilding and other industries. Therefore, from a policy perspective, to the production capacity is still an important part of the supply side structural reform, is for a period of time, especially the “one of the main economic work during the period of 13th Five-Year”.

3 from the industrial cycle of our country is in the stage of the current contraction capacity

Our country is long-term overcapacity. From the perspective of the industry cycle, the current production capacity in the contraction phase, the capacity utilization rate is rising. The reasonable range of the capacity utilization rate is about 80%. Now the main industry of our country’s capacity utilization is below 70%, lower than the reasonable range of more than 10 percentage points, which means that the outstanding problem is still overcapacity. The excess area concentrated in the steel, coal, cement, chemical, electrolytic aluminum, glass and other traditional heavy industry.

Transformation and upgrading of the economic structure is an inevitable trend, but also an important part of economic development under the new normal. Therefore, the heavy chemical industry overcapacity is the upgrade of economic structure leads to long-term overcapacity. Excess capacity adjustment should be based on the supply side, demand side supplement. Therefore, theoretically, the current capacity in the contraction phase. From the demand side, capacity contraction phase will inhibit the industry investment demand expansion; from the supply side, excess capacity into production overcapacity, inhibit the growth of industrial production, resulting in long-term inventory at a high level; from the price, the excess area concentrated in the upstream of the heavy chemical industry, will continue to promote the capacity to improve the supply and demand pattern in the field of industrial production to ease deflationary pressures.

Overcapacity situation why prices of industrial products rose

1 industry demand is the primary power price of industrial products rose

Slowdown in 2016 China’s investment and consumption and foreign trade overall demand steady. On the surface, the original power demand is not industrial goods prices. People tend to attribute the reasons for rising prices for supply contraction. To capacity is an important reason for rising prices, but the industry since 2016 and industrial products is closely related to the demand, is a sufficient condition for rising commodity prices. Careful analysis of segments of the industry demand, we found that with iron and steel, coal, nonferrous metals and other industrial products is closely related to real estate, automobile, infrastructure and other downstream industry demand rebounded significantly, driven by rising prices of major industrial products.

In 2016, the real estate investment growth of 6.9% over the same period last year, up 5.9 percentage points, a total of more than 10 trillion, the new volume is about 660 billion 200 million. Housing construction area of the annual growth of 3.2% over the same period last year, up 1.9 percentage points, added 233 million square meters; new housing construction area of the annual growth of 8.1%, fell 14% in 2015, the new volume of 125 million square meters. According to the Automobile Association statistics, in 2016 car production rose 14.5%, 3 million 616 thousand new. In 2016, the total electricity consumption 59 trillion and 200 billion kwh, an increase of 5%, accelerating 4.5 percentage points. In 2016 a wide infrastructure investment growth of 15.8%.

Real estate, vehicles and infrastructure are iron and steel, nonferrous metals, coal industry and other industries, investment in real estate development, automobile production and infrastructure investment rebounded significantly contributed to the related industrial product price rise.

According to Mysteel statistics, as of the end of November 2016, local reporting has been removed in steel production capacity of 77 million 330 thousand tons, of which only 13 million 860 thousand tons in capacity, accounted for only 21.8%. In addition, in 2016 the new production capacity of 14 million tons, which is a part of 2015 began construction. From the data we can see around the capacity to more than a few years ago, a positive attitude, but the capacity to improve quality. In 2016, crude steel and steel production increased by 1.2% and 2.3% respectively, compared to the same period last year increased by 3.5 percentage points and 1.7 percentage points respectively. The price of iron and steel production capacity to promote, rising demand is the main reason of steel prices.

In addition, the rapid growth of the money supply also support the formation of major industrial products prices. Due to the level of growth and macroeconomic stability in low price in 2015, the central bank cut interest rates 5 times and 4 times lower the deposit reserve ratio, plus 2016 RRR cuts, makes our country more relaxed monetary conditions. From the perspective of money supply since 2016, money supply growth accelerated further, especially M1 significantly accelerate the growth of. 12 at the end of 2016, M2 balance of 155 trillion and 10 billion yuan, an increase of 11.3%, M1 balance of 48 trillion and 660 billion yuan, an increase of 21.4%. From the financing point of view, the scale of social financing in 2016 the stock of 155 trillion and 990 billion yuan, an increase of 12.8%, significantly higher than the nominal growth rate of GDP. Therefore, the rapid growth of the money supply is the main reason to support the prices of industrial products rose.

The 2 part of the industry production capacity to lead to limited impact from the supply side in the short term price

From the historical experience and trends, the trend of the change in the price of major industrial crude oil, coal, steel and nonferrous metals and other commodities is demand rather than supply driven. The two oil crisis in 1970s, aluminum ore production cuts, the Gulf War in 1991 from the supply side over the impact of the rise in price. But supply shocks impact on price is generally impulsive, price changes tend to rise after the one-time step shaped or inverted V shape, it is difficult to form a supply shock to commodity prices rising trend of support.

In 2016, the coal industry in promoting to limit the working days as the starting point to capacity, power coal and coke coal prices have rebounded main types. In 2016 to one of the coal production capacity policies is to strictly control the production time, 330 working days to 276 working days before the. Since the date of production constraints, the decline of the coal yield significantly, prices soared. In 2016, coal production fell by 9.4%, prices rose 27.9% in December. Therefore, the coal to yield limiting capacity to bring up the price, and the demand for coal increased iron and steel, electric power industry has led to a certain extent, the price rise.

3 previous price oversold prices low base