Recently, many places have issued steel production restriction policies in the second half of the year, superimposed raw material prices have peaked and fallen, and steel prices have rebounded significantly after bottoming out. According to soochow securities calculations, since July, the steel industry has shown an increase in steel prices, iron ore, coke and other raw materials fell, and the profits of some varieties have exceeded 1,000 yuan / ton, returning to the average level in the second quarter. Judging from the current situation, the profit probability of steel mills continues to expand, and the possibility of exceeding the high point of the second quarter in the second half of the year is not ruled out.
Price rebounds
According to the monitoring of Tianfeng Securities, due to the peak and decline in raw material prices, steel prices rebounded as a whole, and the profits of steel mills picked up. In terms of subdivision, at present, the gross profit of long-process rebar ton is -28 yuan / ton, and the gross profit of short-process rebar ton is 261 yuan / ton. Cold rolling has the highest profitability, with a gross profit of 702 yuan / ton for long processes and 991 yuan / ton for short processes.
A few days ago, Tangshan City issued a notice of the "July Air Quality Attack Plan", requiring 19 steel companies to continue to implement the requirements of the "Tangshan Iron and Steel Industry Enterprise Environmental Problems Special Governance Plan" and implement the total emission reduction measures of 30%. In addition, Anhui, Gansu, Shandong, Zhejiang, Hunan, Shanxi and other places recently held a meeting to reduce steel production, requiring that the annual crude steel production in 2021 should not exceed 2020. With the gradual landing of production restrictions, the supply and demand environment of the steel market will be gradually alleviated.
The open source securities research report shows that the intensification of the impact of production restrictions has led to a rebound in steel prices after bottoming out. Among them, the price of rebar rose by 180 yuan / ton last week, and the price of hot coil rose by 290 yuan / ton. Soochow Securities believes that from the current situation, the profit probability of steel companies will continue to expand, and the possibility of exceeding the high point of the second quarter in the second half of the year is not ruled out.
According to Kaiyuan Securities, if the production limit becomes stricter again, the price of finished products in the third quarter will be significantly stronger than that of raw materials, and the profitability of tons of steel is expected to improve significantly. However, if the production restriction in the region where the steel company is located only stays on the slogan, the actual implementation is limited, the price of iron ore and coke may return to strength, and the improvement of industry profitability will be relatively limited.
Lange Steel Research Center Ge Xin believes that although the domestic steel market is currently in the traditional demand off-season, but with the news that many places will actually reduce steel production in the second half of the year, the black futures market took the lead in pulling up, and then the spot market began to follow the pull, and steel mills also took this opportunity to raise the factory price. In the short term, the domestic steel market will maintain a trend of shock and rise. It should also be noted that after the demand turns into the off-season, the domestic steel market is still in a weak pattern of supply and demand. After the current round of steel prices rise, whether the market transaction can continue to increase will be the key to whether steel prices can continue to rise.
Performance forecast
China Securities News reporter combed and found that steel prices in the first half of the year continued to be at a high level, and most steel companies' net profit attributable to the mother in the first half of the year increased significantly year-on-year.
Taking Linggang shares as an example, the company expects to achieve a net profit attributable to shareholders of listed companies of 766 million yuan in the first half of the year, an increase of 403.87% year-on-year. The main reason for the change in performance is that in the first half of the year, the company seized the favorable opportunity of the sharp rise in steel prices, continued to promote the low-cost strategy, gave full play to the overall coordination role of the integrated platform of "research, production and marketing service assessment", scientifically organized production, dynamically optimized the market, deepened the benchmarking potential, and greatly improved the profitability of products.
Some listed companies mentioned that with the help of the industry's peak season cycle, the company has fully released the production capacity of the production line. Xingang expects to achieve a net profit attributable to shareholders of listed companies of 2.3 billion yuan to 2.5 billion yuan in the first half of the year, an increase of 110.24% to 128.52% year-on-year. The main reason for the change in performance is that during the reporting period, China's economy was stable, the downstream demand for steel was strong, and although the price of raw fuel was high, the profitability of steel companies improved steadily. The company deeply implements the business policy of "minimal management, extreme scale, and consumption limit", continuously optimizes the production organization, fully releases the production line production capacity, strengthens the investment in scientific and technological innovation, strengthens the benchmarking and cost reduction and efficiency, deepens the internal management innovation, and improves the management efficiency and level. During the reporting period, the company's quality improvement and efficiency improvement effect is obvious, and it is expected that the operating performance in the first half of the year will increase significantly year-on-year.
Some companies adjusted their product structure during the reporting period and increased the proportion of steel and high-quality steel. Xinxing Pipe is expected to achieve a net profit attributable to shareholders of listed companies of 1.25 billion yuan to 1.4 billion yuan in the first half of the year, an increase of 44% to 61% year-on-year. The main reason for the change in performance is that during the reporting period, the company seized the favorable opportunity of the market, gave full play to the efficiency of production capacity, maintained a good situation in terms of production and marketing linkage, quality improvement and efficiency improvement, scientific and technological innovation, key special work, etc., and achieved steady progress in production and operation. The company adopts flexible production mechanism, optimizes the product structure, on the basis of consolidating the market position of ductile iron pipes, adjusts the structure of steel products around the goal of high-quality development, and significantly increases the proportion of excellent steel to further develop the market.
Inventories are rising
It is worth noting that the current national steel social inventory has risen for 4 consecutive weeks, still at a high level, and the characteristics of the off-season are more obvious. Soochow Securities Research Report shows that last week's steel social inventory was 15.1 million tons, an increase of 2% month-on-month. Among them, the stock of long products was 970,000 tons, an increase of 2.7% month-on-month; the inventory of plates was 5.38 million tons, an increase of 0.7% month-on-month.
Tianfeng Securities pointed out that the steel industry's past extensive capacity expansion cycle has ended. Although construction in many places has begun to recover, the capacity utilization rate of clinker lines has increased, and there is still a certain gap compared with previous years. For example, last week, the purchase volume of line snails in Shanghai was 18,100 tons, up 24.8% month-on-month and 34.9% year-on-year. With the recovery of the global economy, the demand of the steel industry may quickly recover or even exceed the pre-epidemic level, and there may be a gap between supply and demand in the steel industry in 2021. It is recommended to pay attention to high-quality industry leaders with variety advantages, strong cost control ability and high dividend level.
This article originated from China Securities News