Events
In view of the recent abnormal situation that the supply and demand of the iron ore market is generally stable and the port inventory continues to rise to a multi-year high, but the price rises sharply, the national development and Reform Commission and the State Administration of market supervision jointly held a special meeting to study the prevention of excessive hoarding of iron ore. For the recent changes in iron ore prices, we make the following comments.
Comments
China's strong policy pressure, iron ore price trend is stable. From the perspective of industrial chain security, iron ore is the cornerstone of the development of middle and lower reaches enterprises, and its supply needs special attention. In recent years, the price of iron ore has risen and fallen sharply. Since 2019, the price of iron ore has fluctuated and risen, and began to fall sharply after reaching the highest point of $230.59/ton in 2021. The sharp fluctuation of iron ore price has seriously affected the stable and safe operation of steel and downstream manufacturing industry. China's iron ore supply has serious structural problems and lack of pricing power, which has a serious impact on the development of the whole industry in China. With the deterioration of the international trade situation and the repeated epidemic, the overseas supply chain continues to be under pressure, the iron ore is facing the dilemma of supply shortage, and the risk of safe supply in the industrial chain is rising. With the resumption of work and production of iron and steel enterprises, the recent rapid recovery of iron ore prices has increased the pressure on iron ore imports. With the emphasis of national policies, the strategic reserve and price stability of iron ore are of great significance to the security of China's industrial chain.
Under the theme of "steady growth", the iron and steel industry is gradually moving towards high-end and customization. In the context of the theme of "steady growth", with the continuous acceleration of the issuance of special bonds and local bonds and the commencement of major infrastructure projects across the country, we expect the demand for steel for infrastructure will pick up significantly; In addition, the supervision of real estate pre-sale funds meets the unified national regulations, and the shortage of real estate capital flow is expected to be alleviated. We believe that the worst time at the real estate end has passed. At the same time, with the gradual improvement of automobile core shortage, the demand for automobile steel will gradually recover; Moreover, the upgrading of manufacturing industry and equipment transformation will support the demand for steel in manufacturing industry. With the gradual recovery of steel demand, steel inventory will also usher in an inflection point. Combined with the recent hot spots in the construction sector and the huge growth of some companies, we believe that the steel industry may be more worthy of expectation in the future. Now it may be in the second stage of steady growth. With the development of infrastructure and real estate policies, the construction season after the Spring Festival is worth looking forward to; At the same time, the annual economic and investment growth is expected to rise quarter by quarter, and the annual profit level per ton of steel is expected to exceed market expectations.
The subsequent steel sector is expected to get out of the new market driven by valuation. With the end of the holiday and the warmer weather, under the current background of steady growth, the central government has set the tone to appropriately carry out infrastructure investment in advance, many policies are expected to begin to be fulfilled, and the demand for steel after the festival is expected to be released in advance. At the important time point of continuous development of infrastructure construction, the prices of key raw materials such as iron ore are kept within a reasonable range under policy regulation, superimposed with the current cost support, supply inhibition and demand release are imminent, and the steel fundamentals are about to recover. The production elasticity and profit margin of iron and steel enterprises deserve attention. Related objects: Hunan Valin Steel Co.Ltd(000932) , Nanjing Iron & Steel Co.Ltd(600282) , Shanxi Taigang Stainless Steel Co.Ltd(000825) .
Risk warning: the epidemic situation fluctuates beyond expectations; Downstream demand for steel was lower than expected.
