The iron and steel industry is closely related to real estate and infrastructure construction, which is divided into ordinary steel and special steel industries
The business of the iron and steel industry is mainly the manufacturing of iron and steel products. The main products include wire rod, sector, profile, pipe, special materials, etc., which are widely used in different links such as real estate, infrastructure, manufacturing and so on. As of January 28, 2022, the market value of each sub industry of iron and steel is 672.195 billion yuan (65%), 191.794 billion yuan (19%) for special materials and 160.616 billion yuan (16%) for other iron and steel. In 2020, the net profit of each sub industry will be 51.803 billion yuan (75%) for ordinary steel, 11.354 billion yuan (17%) for special materials and 5.541 billion yuan (8%) for other steel; Among them, Baoshan Iron & Steel Co.Ltd(600019) , Citic Pacific Special Steel Group Co.Ltd(000708) and Inner Mongolia Baotou Steel Union Co.Ltd(600010) are above 100 billion market value. In 2020, Baoshan Iron & Steel Co.Ltd(600019) net profit and total assets ranked first.
Financial statements of steel industry: the correlation between roe of steel industry and steel price is 0.76
The assets of the iron and steel industry are mainly fixed assets, accounting for 45.12%, mainly houses and buildings, machinery and electronic equipment, means of transport, office and other equipment; The second is inventory (11.39%), including goods in stock, products in process, raw materials, etc. The liabilities of iron and steel are mainly notes payable and accounts payable (19.26%) and short-term loans (11.63%) in current liabilities. The owner’s equity is mainly capital reserve (13.68%) and undistributed profit (11.43%), and the paid in capital and minority shareholders’ equity account for 9.88% and 4.40% respectively.
Iron and steel industry chain: CR10 is 36.8%, the correlation between the difference between rebar price and per ton steel cost and roe is 0.74 in the same period, and the correlation between new construction area of real estate, completion of capital construction investment and fixed assets, year-on-year growth rate of M2 and iron and steel output has reached more than 0.5
Iron and steel is an iron carbon alloy containing a small amount of silicon, manganese, sulfur, phosphorus and other elements. The production process is mainly a long process, including ironmaking, steelmaking, continuous casting and steel rolling. Iron ore and coke account for a large proportion of steel manufacturing costs and are prone to large fluctuations, accounting for 70% in total. Steel is the most commonly used important material for construction projects. Real estate (38%), infrastructure construction (17%), machinery (19%) and automobile (8%) are the main driving forces of downstream demand. China’s crude steel output and top iron and steel enterprises account for more than half of the global output. It is a real iron and steel country. However, China is not a strong iron and steel country, and the competition in the industry is fierce. In 2019, CR10 was only 36.8%. In the next stage, the focus of iron and steel de capacity will be on adjusting the industrial chain structure, promoting mergers and acquisitions and improving the level of industrial concentration.
Timing of steel industry: the long and short annualized returns of timing strategy of steel and general steel industry based on steel price are 8.92% and 10.01% respectively, and the pure long annualized returns are 13.70% and 14.00% respectively. The long and short annualized returns of timing strategy of steel and general steel based on profit price difference are 14.95% and 18.34% respectively, and the pure long annualized returns are 18.25% and 20.67% respectively
Risk tip: enterprises blindly expand production
