Introduction to this report:
Demand margin declined, but inventory still maintained a downward trend. We expect that the negative drag of real estate on steel will decline; In addition, the infrastructure and manufacturing industries have maintained a steady growth trend, which is expected to hedge the decline of the real estate sector.
Summary:
Inventory maintained a downward trend. Last Friday, the social warehouse and factory warehouse of large varieties of steel were 12.8959 million tons and 4.693 million tons, down 438.6 million tons and 103.2 million tons month on month; The total inventory was 17.5889 million tons, down 541800 tons month on month. The apparent consumption of large varieties of steel last Friday was 9.5019 million tons, down 108800 tons month on month. Among them, the consumption of thread and wire rod was 2781700 tons and 959800 tons, down 121400 tons month on month and 61100 tons month on month; The consumption of hot rolling, cold rolling and medium plate is 327.84 million tons, 85.70 million tons and 1.625 million tons, down 2.66 million tons, down 0.27 million tons and up 103000 tons month on month. On a month on month basis, the marginal decline of steel demand last week; The total inventory still maintains a downward trend, and has declined for 10 consecutive weeks; On a year-on-year basis, the apparent consumption of large varieties of steel on last Friday was still 3.01% lower than that of the same period in 2023. But looking at the whole year, we don't think it is necessary to be pessimistic about the steel demand in 2024. In terms of sectors, real estate is still the main drag on steel demand, but after the past two years of decline, the proportion of real estate demand has dropped below 20%, and recently the central bank and many places have introduced favorable policies in the property market. We expect that the negative drag of real estate on steel will decline; In addition, the infrastructure and manufacturing industries have maintained a steady growth trend, which is expected to hedge the decline of the real estate sector.
The total output of major varieties last Friday was 8.9601 million tons, up 0.73% month on month and down 3.33% year on year. The blast furnace operation rate of 247 steel plants was 81.50%, unchanged from last week; The utilization rate of blast furnace capacity of 247 steel plants nationwide was 88.54%, with a month on month decrease of 0.03 percentage points; Last week, the national electric furnace operating rate was 62.82%, up 3.2 percentage points month on month; The capacity utilization rate of electric furnace was 56.47%, up 1.96 percentage points month on month.
From January to April 2024, the national crude steel output will be 344 million tons, 3.0% lower than that of the same period in 2023. Since 2022Q3, the steel industry as a whole has entered into a loss state, and individual steel enterprises gradually began to lose money and reduce production; We expect that under the pressure of continuous losses, or the tail enterprises will gradually clear up, we expect that China's crude steel output will decrease slightly in 2024 compared with 2023.
Last week, the profits of thread and hot coil simulation production were 200 yuan/ton and 150 yuan/ton respectively, 124 yuan/ton and 54 yuan/ton higher than the previous week. From the cost side, the average price of iron ore and scrap steel rose month on month last week; The first round of raising and lowering of coke landed, and the price dropped by 100 yuan/ton month on month. According to Mysteel data, the inventory of imported iron ore last week was 148.5532 million tons, up 0.33% month on month; The profitability of 247 steel enterprises was 54.11%, up 2.16 percentage points month on month. Looking forward to 2024, as the overseas economy enters a recession cycle, the cost side energy and raw material prices are expected to return, the supply will more match the demand, and the profit side is expected to reach the bottom and recover.
Maintain the "overweight" rating. Accelerating the improvement of industrial concentration and promoting high-quality development is the inevitable trend of the development of the steel industry in the future. Steel enterprises with leading enterprises and advantageous product structure will fully benefit. 1) Valin Steel with continuously upgraded product structure, Baosteel with leading technology and product structure, and Xingang with low cost and improved mechanism are recommended; 2) Recommend special steel new material companies with high industry prosperity, CITIC Special Steel and Yongjin Shares with low valuation and profitability, Wujin Stainless Steel, Jiuli Special Material, Changbao Shares, Shengde Xintai, and Tunan Shares with high demand for boiler tubes and oil well tubes; New materials Platinum Branch New Materials, Xianglou New Materials; 3) In the trend of demand recovery, we are optimistic about the upstream resource products with long-term advantages, and recommend Hegang Resources, Ordos, Large and Medium Mining and Anning Shares.
Risk tip: the supply side policy has relaxed more than expected, and demand has dropped significantly.
