Profit per ton of steel has dropped significantly [institutional review]

Investment strategy: the profit per ton of steel calculated at spot prices has fallen significantly recently, which may reflect the market's concern about the relaxation of production restrictions in the later stage. The Winter Paralympic Games and the heating season are coming to an end in mid-March. in the context of steady growth, the policy of production restrictions may be loosened. Last year's profiteering of steel was mainly driven by production limits. If there is no limit to production, the current demand level may put greater pressure on profits per ton of steel. On the demand side, apparent demand continues to pick up seasonally from the previous year, with a year-on-year growth rate of about-6%, which is barely in line with expectations, but it should be noted that the recent mood in the steel market is more active, and last week's table may contain certain downstream replenishment demands. we still need to continue to pay attention to the changes in surface needs in the future. At present, the short-term real estate demand is still not optimistic, the recovery strength of infrastructure has yet to be verified, manufacturing growth may be limited in the case of a high base, pay attention to the risk that peak season demand is lower than expected. While steel prices are still high, steel stocks fell sharply and outperformed the market this week, which may be related to the decline in profits per ton of steel in the past two weeks. The first quarterly report of steel companies is expected to pick up from the fourth quarter. On the one hand, the base in the fourth quarter of last year is very low, on the other hand, there is a factor of inventory appreciation in the first quarter; but because production restrictions may be relaxed in the second quarter, coupled with a high base in the second quarter of last year, the second quarterly report of steel enterprises may be significantly lower than the same period last year.

Weekly market review: this week, the Shanghai Composite Index fell 4%, the CSI 300 Index fell 4.22%, and Shenwan Iron and Steel fell 6.13%. This week, the main rebar contract closed at 4917 yuan / ton, an increase of 16 yuan / ton over last week, an increase of 0.33%, while the hot-rolled coil main contract closed at 5137 yuan / ton, down 73 yuan / ton from last week, or 1.4%. Iron ore main contract closed at 822 yuan / ton, an increase of 9.5 yuan / ton over last week, an increase of 1.17%.

Steel trading volume increased slightly month-on-month: the weekly average national construction steel trading volume this week was 178400 tons, an increase of 3700 tons over the previous week. The social inventory of the five major varieties was 17.576 million tons, a month-on-month drop of 270000 tons. Downstream building materials trading volume increased slightly compared with last week, the same level as the same period last year. In terms of inventory, the social treasury and factory warehouse have declined slightly this week, and the apparent demand has increased slightly again. It is expected that as the steel mills speed up the resumption of production, the market will enter the depot stage.

The operating rate and capacity utilization rate decreased compared with the previous month: according to SMM research, the blast furnace operating rate calculated by SMM on March 9 was 77.79%, 0.61% lower than the previous month, and 0.3% lower than the monthly one. On the supply side, steel mills in Tangshan and Shanxi have received notices to limit production due to the impact of the "two sessions". It is expected that the continuous cycle is relatively short, and the follow-up operation rate and capacity utilization rate will still increase. In the context of "steady growth", there is still room for steel production increment in the first half of the year.

Steel prices are flat from last week: raw materials have risen sharply, pushing up steel prices recently; downstream demand is currently mediocre, and production restrictions are expected to be loosened, leading to a decline in per-ton steel processing fees.

Mineral prices rose again, and coke scrap rose sharply: last week, Australia and Brazil shipped 200741 million tons, down 57000 tons from the previous month, and arrived at the port of 9.425 million tons, an increase of 1.72 million tons. The number of days of imported ore inventory in the latest steel mills is 31 days, an increase of 2 days over the last time. Tianjin Zhunyi metallurgical coke is 3410 yuan / ton, an increase of 200 yuan / ton over last week. Scrap steel is 3220 yuan / ton, an increase of 70 yuan / ton over last week. The price of metallurgical coke is running strongly in various places, and the recovery of demand after the end of the year will certainly stimulate the price of metallurgical coke. Coke enterprises are currently in the stage of removing storage, and the price of coke is expected to be strong in the short term; scrap prices are affected by the sharp rise in international scrap prices and the implementation of domestic scrap fiscal and taxation policies in the short term.

Profits per ton of steel fell sharply again: raw material prices rose sharply this week and profits of mainstream steel fell sharply. According to our simulated steel data, the ore price and coke price of raw materials increased greatly during the week, and the billet cost increased by nearly 260 yuan / ton. Although the end price of per ton steel is basically the same as that of last week, the profit level of per ton steel has dropped significantly, resulting in a negative gross profit. Among them, the gross profit of hot rolled plate (3mm) decreased by 169yuan / ton, the gross profit margin of cold rolled plate (1.0mm) decreased by 171yuan / ton, the gross profit margin of cold rolled plate (1.0mm) decreased to-1.66%, the gross profit of rebar (20mm) decreased by 163yuan / ton, the gross profit margin of medium and heavy plate (20mm) decreased by 174yuan / ton, and the gross profit margin decreased to 0.17%.

Risk hints: the sharp decline in the macro-economy has led to pressure on demand; supply-side pressure continues to increase.