Recently, the iron ore price and the profitability of steel enterprises in the iron and steel industry have aroused widespread concern in the industry. We summarize and analyze the following three problems:
1. Why did iron ore rebound?
The profit of long process steel has rebounded to the high point of the year, while the profit of short process steel with scrap as raw material is still hovering at the low point of the year. Under the catalysis of profit, steel enterprises reduce the consumption of scrap and increase the demand for iron ore; Moreover, for steel enterprises, under the premise of no increase in output, appropriate increase in production is the way to maximize profits. In addition, although the current real estate demand for steel has not improved significantly, it is only a matter of time for the demand to improve under the expected improvement of real estate policy. Based on the above three points, iron ore prices rebounded.
2. Persistence of iron ore rebound
From the perspective of iron ore demand: China's production was limited in winter in the first quarter of 22 years, and the output of the provinces where 2 + 26 cities are located is expected to be reduced by 33.85 million tons. China's demand for iron ore declined in 22 years; Overseas, according to the prediction of the world iron and Steel Association, the global steel consumption will be 1.896 billion tons in 2022, an increase of 41 million tons, an increase of 2.2%, of which the prediction for China is 0, But we expect China to reduce production by 33.85 million tons (only considering the limitation of production in winter), the global steel consumption increased by only 7 million tons in 22 years, and the corresponding increase in iron ore demand was only about 10 million tons. From the perspective of iron ore supply: under the current high profit, overseas mining enterprises have a strong incentive to increase production, and China is improving the independent support capacity of iron ore. therefore, from the perspective of marginal change, we believe that iron ore is in surplus. At present, China's port iron ore 155 million tons of stone has been in the stage of rapid accumulation since the second half of the year. The current inventory is close to a five-year high. Considering the continuous production restriction in the first quarter of next year, it is expected that the inventory may continue to rise. Based on the above four points: with the decline of demand growth and the increase of iron ore production, it is in a surplus state from the perspective of ore, especially the production restriction in the first quarter of 22, and the accumulation of reserves may be more serious. Therefore, we believe that the continuous rise of iron ore price is not long-term sustainable, and we believe that it will still maintain a low-level consolidation state.
3. What do you think of the profitability of steel enterprises
With the decline of iron ore and double coke prices, the promotion of the cost end has come to an end, and the production restriction of steel further limits the disturbance of the cost end. Moreover, with the surplus of iron ore, the bargaining power of steel enterprises at the raw material end may be significantly enhanced, and the profits of the industrial chain will be transmitted to the steel end. At the current time point, the main logic of the steel sector is on the demand side, and the traceable indicators are the steel terminal demand and steel inventory. With the improvement of real estate demand, the further decline of steel inventory, the superposition of steel production restrictions and the improvement of steel enterprises' voice in the upstream, the profits of steel enterprises may usher in a high moment again, and the ton profits may remain high for a long time.
Risk tip: macroeconomic repair is not as expected; Global inflation is higher than expected; The increase of ore production did not meet the expectation; The development and vaccination progress of covid-19 vaccine was lower than expected.
