In 2021, the year-on-year growth rate of steel demand was negative, but the profit per ton of steel in the industry was rich, mainly due to the administrative production restriction at the supply end. Therefore, the trend of production restriction policy in the future is very important to the fundamentals of the industry. From the perspective of recent policy spirit, we expect that administrative production restriction may be loosened in 2022. On December 14, the national development and Reform Commission and the Ministry of industry and information technology jointly issued the notice on the implementation plan for invigorating industrial economic operation and promoting high-quality industrial development, which proposed to “ensure the supply and stable price of bulk raw materials”. The future output reduction policy was not mentioned in the National Conference on industry and informatization on December 20, and the output reduction policy was first put forward at the conference at the end of 2020. With the increasing downward pressure on the economy, steady growth returns to the focus of the policy, while administrative production restriction is a contractive policy, which is inconsistent with the spirit of steady growth. In addition, the steel demand has entered a negative growth state since the third quarter of 2021. Even if there is no administrative production restriction, the output will naturally shrink with the demand, and the necessity of administrative production restriction has been weakened. If there is no administrative production restriction, the profit per ton of steel may fall significantly. The annualized effective capacity affected by administrative production restriction reaches 10% and periodically exceeds 20%. If there is no administrative production restriction, the effective capacity will increase by 10% in 2022, superimposed with negative demand growth, the degree of steel surplus may increase significantly in 2022, and the effective capacity utilization rate will fall back to the level of 2014-2016. Another reference time point is June 2021, when the administrative production restriction expectation was loosened in stages, which immediately led to the sharp contraction of the profit per ton of rebar to the level of – 200 yuan. For iron ore, even if the production restriction is relaxed, the demand for iron ore will not be significantly increased, The decline of steel production in the second half of 2021 is not caused by administrative production restriction (it is caused by demand contraction), so the relaxation of production restriction will not increase steel production (the proportion of blast furnace steel in the structure may increase slightly), the demand for iron ore will not improve much. In addition, the ore price itself is falsely high, and the long-term downward pressure on iron ore price has not changed. It is suggested to look for opportunities in the growing new material industry and pay attention to Zhejiang Yongjin Metal Technology Co.Ltd(603995) , Zhangjiagang Guangda Special Material Co.Ltd(688186) , Fushun Special Steel Co.Ltd(600399) , Zhejiang Jiuli Hi-Tech Metals Co.Ltd(002318) , Yongxing Special Materials Technology Co.Ltd(002756) .
Risk tip: the sharp decline of macro economy leads to pressure on demand; The pressure at the supply end continues to increase.
