Steel Industry Weekly: Macro concerns are difficult to eliminate and demand prices are good

Valuation and recommendation: Production volume increased month-on-month, inventories continued to decline, transactions and steel prices continued to show good momentum, but macro concerns in the medium term remained difficult to eliminate and the stock price of the sector was suppressed. We recommend dips to absorb: 1) high-quality companies in Xinjiang with continued profitability, Bayi Steel, Xinxing Ductile Iron Pipes; 2) companies with sound fundamentals and valuations close to the bottom of history: Baosteel; 3) long-term interest in resources and The value of investment in restructuring companies.

The PBs of Hong Kong stocks Maanshan Iron and Anshan Iron and Steel are 0.6x and 0.7x, respectively, which is still far from the historical minimum P0.3-0.4x. The current valuation is still unspeakable.

Industry Status: Prices: Steel prices rose slightly last week. As of last Friday, Shanghai's rebar prices rose by 20 to 4,750 yuan/ton; hot plate prices remained at 4,790 yuan/ton; and cold-plate prices rose by 20 to 5,400 yuan/ton. Rebar ** main contract slightly fluctuating. Xinjiang's steel prices have adjusted after experiencing continuous and substantial increases, and fell by 50 to 5,520 yuan/ton last week. After the macroeconomic worries were calmed down, the steel price is expected to continue its upward momentum. The recent construction of affordable housing has started to stimulate the demand for steel, especially construction steel.

Cost: Iron ore prices oscillate slightly. Purchase price in Hebei area rose by 20-30 yuan to 1470-1500 yuan/ton, and the purchase price of southern steel plants was stable. The spot ore price in the port fell steadily, with a few traders intending to increase their shipments by 10-20 yuan, 63.5% of India's fines from 1330-1350 yuan per ton, and 62% of Australian fines from 1270-1280 yuan per ton. 65% Brazilian ore fines 1390-1400 yuan/ton. External disk 63.5% Indian powder ore maintains 184-185 US dollars / ton (CIF). Affected by the rectification of Hebei coal mine, some coal mines in Shanxi increased by 50-60 yuan two weeks ago, but most steel mills refused to accept coke price increases because of the drop in steel prices.

Steel prices rebounded last week and some steel mills have already accepted price increases. The price of coke in the domestic market remained at 1,800-1820 yuan/ton (secondary metallurgical coke in Shanxi). The purchase price of the main coking coal and fat coal of the steel mills was 1750-1850 yuan/ton, 1/3 coking coal was 1400-1500 yuan/ton, and coal injection was 1300-1350 yuan/ton. This week, the import market prices continued to fall. Australia's main coking coal (9% ash) spot price was 266-268 US dollars / ton (CIF), which fell 4-5 US dollars / ton compared with the previous weekend, the transaction is still light.

Inventory: Last week, the total inventory of the domestic construction steel market showed a declining trend and the transactions were more prosperous. The key monitored domestic wire rod stocks in 28 major cities totaled 1.218 million tons, which was a decrease of 16,500 tons from the previous weekend; the total stock of rebars was 5,961,100 tons, a decrease of 42,800 tons compared with the previous weekend. Last week, the overall inventory of hot and cold rolled plates did not change much. The key monitored market inventory shows that the domestic hot rolled coil stocks in the 24 major markets this weekend were 4,187,400 tons, an increase of 11,100 tons from last Friday. The volume of cold-rolled coil stocks was 1,372,900 tons, which was a decrease of 22,200 tons from last Friday.

Production: According to the statistics of China Iron and Steel Association, the average daily output of crude steel of key enterprises in early August was 1.63 million tons per day, a year-on-year increase of 1.2%. The average daily crude steel output of the country is estimated to be 1,941,100 tons per day. The recent demand is good, and the steel mills are highly motivated. It is expected that the output will remain high.

Exports: Exports remain high. According to customs statistics, China imported 1.24 million tons of steel in July, a year-on-year decrease of 11.4%; exported 4.44 million tons of steel, a year-on-year decrease of 2.2%, and imported 40,000 tons of billet, equivalent to 3.36 million tons of net crude steel exports, an increase of 2.2% over the same period of last year. . In July, the export of steel products remained high, and the steel price difference caused by the spread of coking coal at home and abroad remained the main reason. The net export of crude steel in the year is expected to exceed the forecast at the beginning of the year and reach 30 million tons.

Risk Warning: Repeated tightening policies have worsened the external situation than expected.