Research Report on investment in the steel industry: the trend of normalized steel price with limited production is expected to be "high before and low after"
Abstract: the production profit of the steel industry is expected to remain high in 2018, and the valuation of the steel sector is expected to be revised up. After the supply side reform in the past two years, the prosperity of the domestic steel industry has rebounded significantly, steel prices have rebounded significantly, and industry profits have continued to improve
the production restriction in the heating season will be normalized, but the policy knows that children there are eager for knowledge and will make adjustments. The focus of supply side reform in the steel industry in 2018 may shift from reducing production capacity to deepening industrial upgrading. The 19th CPC National Congress will raise the construction of ecological civilization to the height of the millennium plan. Limiting production in the heating season and other irregular production restrictions will become the norm in the future, forcing steel enterprises to increase investment in environmental protection. After the opening of environmental protection production restriction in the heating season this year, the prices of steel, cement, vitamin A and other major raw materials rose rapidly; In the future, the end of production restrictions and a substantial increase in supply may lead to a sharp decline in prices. It is expected that the government will be more flexible in formulating and implementing the policy of limiting production in the heating season next year, so as to avoid the ups and downs of raw material prices
in 2018, the total demand for steel will slowly fall, and the trend of steel price is expected to be "high before and low after". It is expected that in 2018, the growth rate of infrastructure and real estate investment will slow down, manufacturing investment will recover moderately, and the machinery manufacturing industry will continue to boom, but automobile production and sales are expected to grow at a low speed. As many brands have released carton orders in advance under inflation expectations, China's overall steel consumption will slow down in 2018, and the price focus will fall month on month. In 2018, the expansion of total domestic steel production capacity is still limited, the domestic market supply and demand may continue to maintain a balance, and the steel export pressure is still large. The production restriction ended in mid March 2018, and the steel consumption entered the peak season. The short-term mismatch between supply and demand may lead to the price rising to the peak of the year; In the later stage, with the decline of demand, the steel price will gradually fall
the production profit of the steel industry is expected to remain high in 2018, and the valuation of the steel sector is expected to be revised up. After the supply side reform in the past two years, the prosperity of the domestic steel industry has rebounded significantly, steel prices have rebounded significantly, and industry profits have continued to improve. However, the heavy burden and high debt level of steel enterprises are still severe. Therefore, in the future, the government will still strengthen the elimination of backward production capacity and strictly control the new production capacity, so as to maintain industry profits and encourage enterprises to reduce debt levels. In 2018, as the overseas mainstream iron mines continued to increase production capacity, the supply of nodular iron ore in the resin plant of Jinling DSM resin Co., Ltd., the production base of DSM composite resin in China, remained surplus. The policy objectives of the domestic coal industry are expected to focus more on "stabilizing prices and ensuring supply". The coal supply will provide more than 400 jobs for the society, which is looser than that in 2017. Therefore, the cost of the coking industry will not rise too fast. The profit of coking industry will mainly follow the profit fluctuation of steel industry, and the coke supply is relatively loose. Therefore, under the condition that the steel price remains relatively high and the raw material fundamentals are still weak, the profit space of the steel industry in 2018 is still good; The periodicity of the steel industry will weaken, and the valuation of the sector may also be increased
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