This week (2022 / 03 / 04-03 / 10, the same below), the total inventory weakened in a narrow range, and the inventory removal stage has been started, in which the factory and warehouse removal rate is high. In terms of supply and demand structure, the environmental protection control after the “two sessions” is still too strict. It is expected that the average hot metal output last Sunday will be 2.1976 million tons, which will become a high point in the short term; The demand side continues to pick up broadly this week. The two sessions of the National People’s Congress and the people’s Political Consultative Conference have released positive signals from the capital and policy levels for the downstream infrastructure side, which is expected to form a strong support for steel demand. It is expected that the demand side will have a super seasonal performance during the peak season of “gold, silver and four”. It is expected that the marginal benefits of supply and demand brought by the peak season at this stage will be very obvious, and the de inventory will be gradually accelerated. At the same time, under the condition of high investment boom in the middle and lower reaches, the stability of market growth will be gradually improved, and the allocation value of the industry will be more prominent.
The supply end began to shrink and the hot rolling capacity was limited. This week, the supply side weakened in a narrow range: the output of five varieties was 9.354 million tons, down 2.15% month on month and 8.95% year-on-year; Thread output was 2.9669 million tons, up 2.21% month on month and down 14.37% year on year. This week, the steel production capacity fell for the first time in nearly a month, mainly due to the decline in the output of hot-rolled coil. Its output this week was 2.9494 million tons, down 6.98% month on month. After the “two sessions”, the environmental protection control is still too strict. Among them, the operating rate of 87 section steel production lines in Tangshan is only 6.9%, down 36.78% month on month. In addition, the operating rate of electric furnace increased by 14.03% month on month last week, but under the situation that the supply of scrap steel was greatly reduced due to the new fiscal and tax regulations, the output of short process steelmaking was under significant pressure. It is estimated that the average hot metal output on Sunday will be 2.1976 million tons, which will become the high point in the short term, the steel output will fluctuate, and the medium-term output will have limited space for the whole year under various constraints.
With the advent of peak season benefits, the inventory destocking stage starts. This week, the demand side showed a wide recovery, and the total inventory of five varieties and threads was decontaminated: the total demand of five varieties of steel mills was 10.017 million tons, an increase of 7.36% over the previous week, of which the total demand of threads was 3.3324 million tons, an increase of 30.41% over the previous week; On Friday, the total inventory of varieties was 235142 million tons, down 2.74% compared with last week, including 1.51% of social inventory and 6.22% of factory inventory; The total inventory of thread was 128419 million tons, down 2.77% from last week, including 0.85% of social warehouse and 8.75% of factory warehouse. The demand side continued to pick up in a wide range this week. The terminal procurement volume of Shanghai line screw week was 15100 tons, an increase of 55.99% over last week, and the downstream terminal procurement volume is being gradually repaired. The two sessions of the National People’s Congress put forward the goal of China’s GDP growth of 5.5% this year, which released positive signals from the capital and policy levels for the downstream infrastructure, and formed a strong support for the demand for steel. This week’s inventory has opened the decontamination mode, and the inventory inflection point is slightly earlier than that of the same period last year, which is mainly affected by the low total inventory this year. It is expected that the marginal benefits of supply and demand brought by the peak season at this stage will be very obvious, and the de inventory will be gradually accelerated. At the same time, under the condition of high investment boom in the middle and lower reaches, the stability of market growth will be gradually improved, and the allocation value of the industry will be more prominent.
Risk factors: the possibility of repeated outbreaks in local areas; The supply reduction of cyclical industries is less than expected; Demand is weaker than expected; Global liquidity tightened more than expected.
Investment strategy. The iron and steel industry is going through two irreversible stages of long-term production restriction and concentration improvement, which is of far-reaching significance to the development of the industry. While reforming the supply side, upgrading the industrial chain and energy structure and responding to the dual carbon and dual control policy, we believe that the allocation value of the A-share steel sector is high in the stage of demand growth and gross profit margin increase. It is suggested to focus on the investment target with the following three attributes: first, the target with cost advantage; 2、 M & A and new production capacity development exceed expectations; 3、 Enterprises with the advantage of producing special varieties. Highlight Zhejiang Jiuli Hi-Tech Metals Co.Ltd(002318) , Baoshan Iron & Steel Co.Ltd(600019) , Xinyu Iron & Steel Co.Ltd(600782) , Nanjing Iron & Steel Co.Ltd(600282) , Tiangong International; It is suggested to focus on Shanxi Taigang Stainless Steel Co.Ltd(000825) etc.
