Demand on the infrastructure and manufacturing side is gradually picking up. It is expected that demand in the steel industry will not be pessimistic, and industry profits are still expected to gradually recover.
The Zhitong Finance app learned that Guotai Junan Securities released a research report saying that total steel inventories have maintained a declining trend. The share of demand on the real estate side has declined, and the negative impact of the decline in new construction on steel demand has weakened. Demand on the infrastructure and manufacturing side is gradually picking up,Demand in the steel industry is not expected to be pessimistic, and industry profits are still expected to gradually recover. Maintain the “Overweight” rating.Accelerating industrial concentration and promoting high-quality development is an inevitable trend in the future development of the steel industry. Leading steel companies and steel companies with an advantage in product structure will benefit fully.
1) Focus on recommending Hualing Steel (000932.SZ), whose product structure continues to be upgraded; Baosteel Co., Ltd. (600019.SH), Shougang (000959.SZ), which have leading technology and product structures; low-cost steel companies Fangda Steel (600507.SH) and New Steel Co., Ltd. (); and also recommend emerging casting pipes (000778.SZ), Jinzhou Pipeline (002443.SZ), and Youfa Group (), which have a high degree of industry prosperity 600782.SH 601686.SH Special Steel New Materials Company, CITIC Special Steel and Yongjin shares at the bottom of valuation and profit, Changbao shares, Jiuli Special Materials, Shengde Xintai, high-temperature alloy leader Tunan shares; 3) Under the trend of demand recovery in demand, we are optimistic about upstream resource products with long-term pattern advantages, and recommend Hegang Resources, Dazhong Mining, Anning Co., Ltd., etc.
Guotai Junan's main views are as follows:
Inventories fell below the same period in the past three years, and demand was not pessimistic.
Last Friday, social stocks of major steel varieties were 9.485,800 tons, down 399,900 tons; factory warehouses were 4.1953 million tons, down 143,200 tons; and total inventories were 13.6811 million tons, down 5341,000 tons from month on month. The apparent consumption of major steel varieties last Friday was 9.2683 million tons, down 393,500 tons from the previous month. Among them, the apparent consumption of thread and wire was 2,78.14 and 1,085,500 tons, respectively, down 19.75 and 59,900 tons from month to month; apparent consumption of hot rolling, cold rolling, and medium and heavy plate was 31646, 78.31, and 1,453,700 tons, respectively, down 9.89, 5.30, and 15,900 tons from month to month.
Looking at the real estate side, although data on the real estate side is still declining, since 2022, with the decline in new real estate construction, the proportion of real estate in demand in the steel industry has declined from the previous stable 35%. The negative impact of the decline in new construction on steel demand has continued to weaken, and with policy support, the downtrend in the real estate industry itself is limited. Looking at the infrastructure and manufacturing sectors, along with the decline in the share of steel demand on the real estate side, the share of steel demand on the manufacturing and infrastructure side has increased. In the context of policies supporting local debt and the gradual recovery of the manufacturing industry, the agency believes that demand in the steel industry is not pessimistic.
Last Friday, the total output of major steel varieties was 8.734,200 tons, down 4.08% from the previous month and 7.12% from the previous year.
The operating rate of blast furnaces in 247 steel mills was 81.01%, up 0.89 percentage points from the previous month; the capacity utilization rate of blast furnaces in 247 steel mills nationwide was 89.23%, down 1 percentage point from the previous week; the national electric furnace operating rate was 62.18%, the same as the previous week; the capacity utilization rate of electric furnaces was 55.72%, up 0.51 percentage points from the previous week. From January to September 2023, the country's crude steel production was 795 million tons, up 1.7% year on year. Against the backdrop of a recent decline in industry profits, steel companies have taken the initiative to overhaul, and it is expected that industry supply will maintain a weak pattern.
Last week, simulated production profits for thread and hot coils were 177.70 yuan/ton and -72.30 yuan/ton, respectively, up 48.60 yuan/ton and 48.60 yuan/ton from the previous month.
From the cost side, mineral prices and coking coal prices are still high. The imported iron ore inventory is 11.08855 million tons, up 151,400 tons from the previous month. According to Mysteel data, the profit margin of 247 steel companies last week was 20.78%, up 3.9 percentage points from the previous week. Considering the weak supply in the steel industry in the fourth quarter, the low level of steel inventories, and our expectations that demand is not pessimistic, we believe that industry profits are still expected to gradually recover.
Risk warning:Supply-side policies were relaxed beyond expectations, and demand recovery fell short of expectations.