For the first time, Shangang Steel's high-quality iron ore assets covered the supply side of the “increased holdings” rating. Capital expenditure for the four major mining projects indicates that the medium- to long-term inflection point in iron ore supply has arrived, and extreme climates such as the Vale tailings dam accident and the Australian hurricane at the beginning of the year have exacerbated the decline in iron ore sales. On the demand side, China's environmental production limits have weakened, and Southeast Asia and South Asia have new blast furnace production capacity, which may drive iron ore demand. We expect iron ore prices to rise by 150/50/50 yuan in 2019-2021, respectively. The company has a high grade of iron powder. After the divestment of loss-making assets, the cap was successfully removed in 2018. Future performance is expected to benefit from rising mineral prices, and declining mineral reserves may force the company to develop new mining sources. We expect the company's EPS in 2019-2021 to be 0.29/0.37/0.45 yuan, with a target price of 6.90-7.11 yuan, covering the “increased holdings” rating for the first time. The company's performance has gradually improved, and it is expected that the company will continue to lose money in 2016 and 2017, mainly due to the cancellation of mining rights in Jingang Mining and the calculation of impairment losses on related assets; in 2018, although the average price of iron ore declined slightly, the company turned a loss into a profit in 2018 due to no asset impairment losses, etc., and successfully removed its cap in 2018. The company has a beneficiation capacity of 2 million tons, with an annual output of 1.2 million tons with a grade greater than 65% of iron powder; in addition to its own production, some of the iron ore can be purchased from Jinding Mining, a shareholding company. Among the mining areas under the company, the Iron Mountain Mine was closed in 2016, the Gold Steel Mining Chopka Mine had its mining rights cancelled at the end of 2017, and the Hou Zhuang mine has only 1.5 years left for mining. The only mining period left for the Hou Zhuang mine is the Zhaokou mine, which can be mined later, with reserves of about 12.2 million tons. Faced with declining reserves, the company may step up its prospecting efforts, encrypt exploration in the original no-mine area, find new supplementary ore volumes, and extend the service life of the mine. There is an inflection point in iron ore supply. Future demand growth is still strong. The peak capital expenditure period for the four major mining iron ore projects occurred in 2012-2013. The peak of capital expenditure led the peak of production growth by 3-5 years, and the peak increase in production corresponds to 2015-2018. Since then, production growth has declined year by year, and under the influence of the Vale mine disaster and the Australian hurricane incident, the decline in iron ore sales has intensified. In addition, the removal of ground steel production capacity and suppression of scrap imports may have led to the increase in scrap supply faced by steel mills in 2019 mainly due to natural growth in production, with limited replacement of iron ore. We expect the increase in scrap to be only 14.97 million tons in 2019 after iron ore is replaced by iron ore. Among global demand, China's environmental production restrictions have been relaxed, and the steel industry in India, Vietnam and other countries has developed rapidly in recent years, which is expected to lead to an increase in iron ore demand. After the supply inflection point, the elasticity of iron ore prices increased, and we updated our earlier judgment. It is estimated that the four major mines will cut production by 92.33 million tons in 2019, that the total increase in iron ore and the four major mines is about -54.3 million tons, and iron ore demand will increase by 10.76 million tons. Mines are sensitive to cash costs, and the concentration of the industry is high. The price elasticity of iron ore supply is stronger than that of the steel industry. Combined with the rigidity of steel mill production and low sensitivity to iron ore prices, the bargaining power of iron ore is strong. As the increase in supply declines after iron ore and scrap are added up, the elasticity of iron ore supply prices may further increase. Benefiting from rising mineral prices, the company's “increased holdings” rating for the first time depends on whether iron ore prosperity continues in the medium to long term, and the company's performance is expected to benefit. We expect the company's BVPS in 2019-21 to be 4.31/4.68/5.13 yuan, corresponding to PB 1.53/1.41/1.28 times, and a comparable company average PB (2019E) of 2.02 times. Considering that the company's iron ore reserves are far less than the four major mines, we gave the company 1.60-1.65 times PB in 2019, with a target price of 6.90-7.11 yuan, covering the “increased holdings” rating for the first time. Risk warning: The resumption of production in the four major mines exceeded expectations, and iron ore prices fell short of expectations; steel demand declined sharply; production and sales of the company's products declined or costs and transportation costs rose, leading to a decline in performance.