Following a sharp decline in 2020, all terminal consumption will increase in 2021. The consumption of stainless steel in the global home appliance industry will only drop by 1% in 2020. It is expected that the consumption of stainless steel in the global home appliance and kitchenware industry will increase by 13% in 2021. The consumption of stainless steel in the chemical, petrochemical and energy industries will fall by 4% in 2020 and will increase by 9% in 2021. Automobiles are the only industry where stainless steel consumption has fallen by more than 10%. It dropped by 13% last year and increased by 17% this year. Stainless steel consumption in the construction, structure and infrastructure industries fell by 3% last year and increased by 13% this year. Stainless steel consumption in heavy industry fell by 4%. Consumption of stainless steel in other areas such as the defense market dropped by 3%, but this year it has grown substantially.

    The structure of stainless steel products has also undergone similar changes in the past two years. Cold-rolled products fell by only 3% in 2020, and this year has seen a substantial increase. It will take some time for the product market to recover. These products are not bulk commodities and are closely related to the automotive industry. Therefore, these industries are more difficult and it will take longer to recover.

    Let’s take a look at the situation in each production area. China’s output has not declined. When we were predicting changes in production in various countries and regions, we expected China’s output to grow negatively in 2020. In fact, China’s stainless steel output increased by 5% last year. . It is expected that China's stainless steel production will increase by 13% this year. However, as the world's largest stainless steel market, China's growth rate has slowed down. The growth rate of other markets is higher than that of China. Production in Europe and other regions both achieved double-digit growth. Last year, the output of these countries and regions fell by more than 10%. Therefore, the growth rate in 2021 will exceed 10%. So these markets have changed by more than +/-10%.

    What we have experienced in the market in our industry is what I call the "bullwhip effect". The meaning of the "bullwhip effect" can be seen in this picture. When end-users or consumers, all end-consumer consumption of stainless steel changes by more than +/-10%, foundries, parts suppliers, and secondary distributors (called retailers in Europe and America) in the supply chain, one Level distributors, such as processing service centers or major distributors, all links of suppliers will amplify this change. Modern factory found that its customer orders increased by 5% or 10%, his order volume to his suppliers would increase to 20%, and his suppliers would believe that the demand from the foundry increased by 20%. So his order from his supplier or service center will increase to 25-30%. Therefore, the data gap between the entire supply, actual demand and apparent demand will be enlarged. As a steel mill at the bottom of the food chain, what actually sees is a substantial increase in consumption, and orders will increase by 40%, but once again, this is not actual demand, but apparent demand. This may cause an increase in inventory or a decrease in inventory.