Investment summary:
Market review:
As of the closing on December 10, the steel sector rose 0.15% this week, the CSI 300 index rose 3.14%, and the steel sector lagged behind the CSI 300 index by 2.99%. From the sector ranking, the steel industry ranked 20th among the 28 sectors of Shenwan last week, with an increase of 34.39% year to date, ranking 5th among the 28 sectors of Shenwan.
Talk every Monday:
Supply remained low and production restriction policy oriented fine-tuning: according to the data of China Iron and Steel Association, in late November 2021, the daily output of crude steel of key iron and steel enterprises was 1.7169 million tons, a month-on-month decrease of 2.61%, and the daily output of crude steel in the whole month was 1.7325 million tons, a month-on-month decrease of 5.18%, a year-on-year decrease of 18.25%; This week, the regulation and control measures for blast furnace and sintering in Tangshan were strengthened, and the capacity utilization rate decreased to 53.51%, with a week-on-week ratio of -6.32pct and a year-on-year ratio of -25.22pct. Pollution weather warnings were issued in many places in the north, the high maintenance status of steel mills was maintained, and the weak trend at the supply end is expected to continue; Fine tuning the production restriction policy and further standardizing the implementation of administrative penalties. The State Council issued a notice requiring that administrative penalties such as ordering production and business suspension and closure shall not be implemented "across the board" without identifying the illegal facts; According to our iron and steel network, on the 12th, Tangshan adjusted the performance levels of 13 steel enterprises and 8 coke enterprises from level D to level C. We believe that the fine-tuning of the production restriction policy does not change the overall orientation. With the implementation of the production restriction policy in the second stage of the Winter Olympic games and the heating season, the supply side will remain weak;
The demand is expected to improve, and the profit per ton of steel is slightly corrected: the central economic work conference held this week emphasizes the importance of stability and seeking progress while maintaining stability, which refers to the statements of moderately advancing infrastructure investment, promoting the healthy development and virtuous cycle of the real estate industry; More positive wording promotes the expected improvement of medium and long-term demand for iron and steel, but re mentioning the contents of non speculation in housing and urban policies may indicate that it is still difficult to have a rapid and comprehensive recovery in the downstream of real estate, waiting for further observation next spring; In contrast, the warming trend at the plate end has a better sustainability. While the car core shortage is gradually alleviated and the impact of power restriction subsides, this week, the national development and Reform Commission said that it would further improve the plate demand end by promoting the renewal of rural household appliances and a new round of cars to the countryside; The price of iron ore and coke rebounded this week, and the profit of steel fell slightly, but it is still on the high side. The short-term coke price is expected to maintain a stable operation. At the same time, the suppression of the price by the high inventory of iron ore still exists. We maintain our previous judgment, the collapse of the cost side is still continuing, and the profit of steel is expected to remain high;
Market impact: steel profits are running at a high level, cost collapse continues to improve the overall valuation of the industry, real estate infrastructure investment is expected to improve significantly, pay attention to the inflection point at the investment end at the beginning of next year, it is expected that the performance of steel enterprises will continue to differentiate in the fourth quarter, and stainless steel processing enterprises with anti cycle and growth attributes have significant advantages. In addition, Southern plate steel enterprises with less pressure on energy consumption control are expected to record good performance;
Investment strategy: focus on Zhejiang Yongjin Metal Technology Co.Ltd(603995) and Zhejiang Jiuli Hi-Tech Metals Co.Ltd(002318) industrial material processing targets with growth potential benefiting from the recovery of manufacturing industry, continue to recommend Xinyu Iron & Steel Co.Ltd(600782) plate targets with small increase in production and high performance elasticity in the first half of the year, and Hunan Valin Steel Co.Ltd(000932) plate leaders benefiting from the increase of added value of products.
Risk tip: policy implementation is less than expected, supply contraction is limited, and demand is less than expected.
