This week (2022 / 03 / 11-03 / 17), the inventory removal rate slowed down, mainly due to the limited delivery of steel mills under the epidemic, resulting in the continuous rise of factories and warehouses. In terms of the supply and demand structure of the steel market, although the supply side is in the rising channel in the peak season, the rising space of the supply side is limited due to factors such as policy side control and high cost of raw materials this year; This week's pullback on the demand side was also mainly affected by the repeated epidemic, with local projects shutting down one after another, and the transmission of materials to the downstream was not smooth. It is expected that the impact of the epidemic will improve with the flexible regulation of policies and the transition of downstream response. At that time, the rising characteristics of steel demand side in peak season will be more obvious, and the inventory removal rate is also expected to rise super seasonally. The fundamentals and profit center of the steel market are expected to be more obvious in the peak season, and the industry configuration pattern will gradually shift from slow rise on the left to fast rise on the right. The current configuration value of the industry is more prominent.
The supply side recovers gradually, with limited growth in peak season. This week, the supply side became stronger in a narrow range: the output of five varieties was 9.548 million tons, up 2.07% month on month and down 9.37% year-on-year; Thread output was 3.01 million tons, up 1.45% month on month and down 14.39% year-on-year. This week, the recovery of hot rolling output is more prominent, recovering the depression where the output fell last week. After the Winter Olympic and Paralympic Games, production has resumed in most areas, among which the utilization rate of blast furnace capacity of Shanxi steel plant has reached a high level. The utilization rate of blast furnace capacity in Tangshan increased by 5.6% to 57.74% month on month. Some blast furnaces resumed production on the 13th-15th, and the marginal operating rate warmed up. It is expected that the national average daily hot metal production will rise to more than 2.2 million tons. Under the background of local epidemic spread, traffic control has appeared in many regions across the country, the circulation and transmission of resources between regions are not smooth, and the arrival volume of scrap steel has weakened month on month. Among them, some steel mills in medium and high-risk areas of Hebei Province have stopped collecting scrap steel, and the market is at a standstill. The average profit of 40 independent EAF steel mills in China is - 166 yuan / ton. The decline of production enthusiasm of short process steelmaking enterprises and the decrease of raw material arrival have a great impact on the output in the short term. In mid March, steel production is also in the rising channel of the peak season. However, due to the control of the policy side and the high cost of raw materials this year, the rising space of the supply side is limited. It is expected that in the short term, the steel output will fluctuate and become stronger, while the seasonal output growth in the medium term will be weaker than that in the same period of previous years.
The market chain transmission is affected by the epidemic situation, and the configuration value in peak season is more prominent. This week, the demand side showed a narrow correction, and the direction of the total inventory of five varieties and threads remained unchanged: the total demand of five varieties of steel mills was 9.6208 million tons, a decrease of 3.96% compared with the previous week, of which the total demand of threads was 3.0838 million tons, a decrease of 7.46% compared with the previous week; On Friday, the total inventory of varieties was 234434 million tons, a decrease of 0.31% over last week, including 2.04% for social warehouse and 4.84% for factory warehouse; The total inventory of thread was 127681 million tons, with a decrease of 0.57% compared with last week, including 2.3% for social warehouse and 5.29% for factory warehouse. The narrow correction on the demand side this week was mainly caused by the repeated impact of local epidemic and the obstruction of logistics. Among them, most of the steel mills in Guangdong Province were blocked by logistics, and some medium and high-risk areas could not even deliver and deliver normally. Most steel mills also took the initiative to suspend distribution to deal with the deterioration of the epidemic. At present, the epidemic covers many provinces in China and affects many mainstream cities. In some cities, only key projects are under normal construction, and the closure rate of construction sites in the region is about 47%.
The inventory removal rate slowed down this week, mainly due to the impact of the continuous rise of factories and warehouses due to the limited delivery of steel mills under the epidemic. It is expected that the impact will improve with the flexible regulation of policies and the transition of downstream response. At that time, while the demand side performance of iron and steel will rise, the inventory removal rate is expected to rise in a super seasonal manner. The fundamentals and profit center of the steel market are expected to be more obvious in the peak season, and the industrial configuration pattern will gradually shift from slow rise on the left to rapid rise on the right, with prominent industrial configuration value.
Risk factors: the possibility of local epidemic recurrence; The supply reduction of cyclical industries is less than expected; Demand is weaker than expected; Global liquidity tightened more than expected.
Investment suggestion: 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.
