Investment strategy: in 2021, the year-on-year growth rate of steel demand is negative, but the profit per ton of steel in the industry is rich, mainly due to the administrative production restriction at the supply side. 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) .
One week market review: this week, the Shanghai Composite Index fell 0.39%, the Shanghai and Shenzhen 300 index fell 0.67%, and the Shenwan steel plate fell 3.99%. This week, the main contract of rebar closed at 4698 yuan / ton, with a week-on-week increase of 27 yuan / ton, a range of 0.58%; the main contract of hot rolled coil closed at 4795 yuan / ton, with a week-on-week decrease of 31 yuan / ton, a range of 0.64%; The main iron ore contract closed at 708 yuan / ton, with a week-on-week increase of 26.5/ton, or 3.89%.
The social Treasury continued to decline: the weekly average of the national construction steel trading volume this week was 152900 tons, with a month on month decrease of 25100 tons. The social inventory of the five varieties was 8.769 million tons, a month on month decrease of 313600 tons. This week, the trading volume and apparent consumption of building materials decreased, or it indicates that with the gradual shutdown of the construction site, the downstream demand began to enter the off-season decline stage. As demand weakens, the inflection point of inventory increase and decrease will also come.
Capacity utilization decreased: this week, the blast furnace operating rates of Mysteel and Tangshan Steel Plant were 45.99% and 39.68% respectively, with a month on month comparison of -0.42pct and -1.59pct last week; This week, the utilization rates of blast furnace capacity of Mysteel and Tangshan Steel Plant were 61.11% and 51.79% respectively, with a month on month comparison of -1.40pct and -0.48pct last week. The operating rate of 71 home appliance arc furnaces this week was 44.60%, with a month on week increase of + 0.06pct; The capacity utilization rate was 48.88%, down from -1.12pct last week. Tangshan has started the level II emergency response for heavy pollution again since last Sunday. At the same time, Handan has also issued a notice on strengthening the control of adverse meteorological conditions. Therefore, the production level in Beijing, Tianjin and Hebei has decreased significantly this week, and the national output has also shrunk significantly.
Steel price decreased slightly: myspic comprehensive steel price index decreased by 0.29% on a weekly basis, including 0.25% for long materials and 0.35% for plates. Shanghai rebar is 4870 yuan / ton, with a decrease of 30 yuan / ton on a week-on-week basis, with a range of 0.61%. Shanghai hot rolled coil is 4930 yuan / ton, with a decrease of 10 yuan / ton on a weekly basis, with a range of 0.20%. As demand weakened this week, spot steel prices also began to decline slightly. There is a strong wait-and-see mood in the market and high-level transactions are general. It is necessary to continue to pay attention to the impact of environmental protection and the Winter Olympic Games on production restriction and winter storage.
The rebound in ore prices continued: platts62%123.75 US dollars / ton this week, with a weekly increase of 5.5 US dollars / ton, and the price difference between high and low products expanded. Last week, Australia and Brazil delivered 22.656 million tons, an increase of 2.469 million tons month on month, and the arrival volume was 10.607 million tons, an increase of 1.292 million tons month on month. The latest steel mill imported ore inventory days were 28 days, down 2 days from the last time. Tianjin Zhunyi metallurgical coke was 2710 yuan / ton, a decrease of 0 yuan / ton compared with last week. Scrap steel was 3160 yuan / ton, an increase of 110 yuan / ton compared with last week. Recently, the shipment volume and arrival volume of iron ore have continued to rise, and the port inventory of iron ore has maintained a high level. The demand side molten iron production has stabilized at a low level, and the iron ore market is trading to resume production. However, as the steel enterprises supplement the warehouse and enter the middle and later stage, the upward space of ore price has been limited.
Profit decline accelerated month on month: the profit of mainstream steel continued to fall this week. According to our simulated steel data, the continuous rise of iron ore and scrap prices during the week drove the cost side to continue to rise, while the weekly average price increase at the finished end was less than that of raw materials, and the decline of profit per ton of steel accelerated month on month. Among them, the gross profit of hot rolled coil (3mm) decreased by 107 yuan / ton, and the gross profit margin decreased to 16.14%; the gross profit of cold rolled coil (1.0mm) decreased by 130 yuan / ton, and the gross profit margin decreased to 11.22%; The gross profit of deformed steel bar (20mm) is reduced by 125 yuan / ton, and the gross profit margin is reduced to 18.27%; The gross profit of medium and heavy plate (20mm) is reduced by 145 yuan / ton, and the gross profit margin is reduced to 14.42%.
Risk tip: the sharp decline of macro economy leads to pressure on demand; The pressure at the supply end continues to increase.
