Shengang Securities: annual data released before the festival, both supply and demand are weak [Iron and Steel Industry Research Weekly report]

Market Review:

As of the close on January 21, the iron and steel sector fell 0.24% per week, the CSI 300 index rose 1.11%, and the steel sector lagged behind the CSI 300 index by 1.35%. Judging from the plate ranking, the weekly increase of the iron and steel industry ranked 11th among the 31 plates of Shenwan, with an increase of-2.96% so far this year, and ranked 14th among the 31 plates of Shenwan.

Talk about it every Monday:

According to the annual data, the daily output of crude steel increased by 20.3% in December compared with the same period last year: according to the data of the Bureau of Statistics, 31.9785 million tons of crude steel were reduced in 2021 compared with the same period last year, successfully completing the task of reducing the annual output of crude steel by 20 million tons proposed by the Ministry of Industry and Information Technology at the end of 2020. The daily output of crude steel in December was 2.78 million tons, up 20.3% from the previous month. Under the combined influence of the pressure of flat control policy and high profits per ton of steel in mid-December, the production expansion of steel mills continued, but the pace may be disturbed by the policy of limiting production in the heating season. Affected by the production restrictions in the northern region and the increase in inspection and maintenance during the Spring Festival, the recovery rate of national crude steel output may slow down for a short time, but steel mills are still expected to resume production after the festival. Combined with the recent statement of the Development and Reform Commission and the Bureau of Statistics on moderately carrying out infrastructure investment policies in advance, the steel market after the festival is expected to usher in a rebound pattern of supply and demand Synchronize.

Before the festival, supply and demand are both weak, profits per ton of steel continue to decline, and continue to pay attention to the growth opportunities of stainless steel, special steel, seamless steel pipe, cast pipe and welded pipe subdivided racetrack enterprises: the spot market before the festival has entered a weak pattern of supply and demand, and trade trading is light. As of January 20, the weekly output of the five major varieties of steel was-2.63% (- 3.39pct), the social inventory rebounded significantly, and the apparent consumption ring ratio was-7.04% (- 7.86pct). Year-on-year-12.48% (- 6.01pct), the average daily turnover of building materials fell to 56400 tons; The logic of resuming production of steel mills this week continued to deduce, gross profit per ton of steel continued to decline, as of January 21 thread, hot coil spot spot ton gross margin of steel dropped to less than 700 yuan / ton as scheduled; Under the circumstances that the guidance of restrictions on crude steel production is not yet clear, steel mills are expected to continue to resume production for a long time, and profits per ton of steel may be suppressed for a long time. Focus on stainless steel, special steel, seamless steel pipe, cast pipe subdivision track enterprise growth opportunities and industry leader valuation repair opportunities, superimposed infrastructure investment expectations are expected to rise, and pay close attention to the investment opportunities brought by the acceleration of pipeline transformation to the cast pipe and welded pipe market.

Market impact: steel mills are still resuming production, paying attention to the weak expectation of administrative production restrictions, the suppression of profits per ton of steel and the release of capital construction demand. Stainless steel processing enterprises with anti-cycle and growth attributes have significant investment value. Special steel, seamless pipe, welded pipe and cast pipe enterprises with low valuation have better investment opportunities.

Investment strategy: focus on recommending the benefits of manufacturing recovery, stainless steel processing enterprises with growth potential Yongjin shares, pipe processing enterprises Jiuli specialties, recommend special steel leader CITIC Special Steel with significant valuation advantages;

Risk hint: policy implementation is not as strong as expected, supply contraction is limited, demand is not as expected.