Faced with a historic turning point, how hard is “Iron Man” of A shares? _Sina Finance_Sina.com



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Facing a historic turning point! How hard is “Iron Man” in A-share?

Dong Tian

Towards the end of the year, institutions started forecasting the steel market for the next year.

Chen Kexin, chief analyst at the Lange Steel Economic Research Center, pointed out that in 2020 China’s steel market will continue to expand and total consumption demand is expected to rise to a new level of 1 billion tons (crude steel), achieving a historical turning point. Total steel market demand in the new year is expected to continue to grow steadily and could reach 1.1 billion tons, a new high.

The demand continues to grow

Chen Kexin said domestic steel consumption demand will continue to grow in 2021. Apparent consumption of crude steel is expected to exceed 1.06 billion tons. The volume of direct exports of crude steel (steel equivalent) for the full year is estimated to be around 80 million tonnes, which will go from a decrease to an increase. Adding the above two aspects, China’s total crude steel demand in 2021 is estimated to reach 1.1 billion tons.

In response to the increased demand for crude steel, Lange Steel stressed that macroeconomic growth is expected to accelerate in 2021. In the internal market, decision-making departments are expected to continue to fill gaps and increase infrastructure investments in the new year as an important starting point for stable economic growth. At the same time, real estate investments will continue to grow at a relatively fast pace. China’s domestic steel consumption will continue to gain momentum in 2021. strengthen.

According to the latest statistics from the China Construction Machinery Industry Association, in October 2020, the 25 domestic mainframe manufacturers included in the statistics sold a total of 27,331 units of various excavation machinery products, a year-over-year increase of 60.5 %. This is 7 consecutive months of excavator sales data with a year-on-year growth rate of over 50%. Sales of excavators continued to maintain high growth, indicating that infrastructure investment projects in China have started intensively and the growth rate of infrastructure investment is accelerating further. This not only indicates that the total domestic demand for steel in the new year will continue to strengthen, but also means that construction steel has a strong position in total demand.

On the international market, European and American countries are expected to be able to implement large-scale fiscal stimulus plans in the new year and not withdraw from extremely accommodative monetary policies. Although macroeconomic recovery is expected, the global manufacturing industry is also showing a positive trend, which is good news for the improvement in global steel demand and for the Chinese external demand environment.

Industry experts pointed out that China’s steel demand structure in 2021 is expected to continue the two characteristics of 2020: First, domestic demand will be highlighted in the total demand; second, the demand for construction steel will be highlighted in the domestic demand.

Production remains high

Affected by factors such as increased downstream infrastructure and property operating rates, the steel industry’s overall production and sales exceeded expectations this year. Especially during the high season of “Golden Nine and Silver Ten”, the production and sales of the industry have increased dramatically from year to year.

According to data from the National Bureau of Statistics, in October 2020, crude steel production was 92.2 million tons, down 0.4% month-on-month and up 12.7% year-on-year. ; pig iron production was 76.17 million tonnes, up 0.5% on a monthly basis and 9.4% on an annual basis; steel production was 11848 million tons, the monthly increase was 0.4% and the year-on-year increase of 14.2%. In October, driven by the significant increase in downstream demand, the domestic steel market showed a trend of volatility and recovery. Although the production restriction policy to protect the environment restricts the production of steel companies and the release of production capacity has slowed down, steel production still remains at a high level.

Since November, the domestic steel market has shown a trend of rapid growth and domestic steel prices have repeatedly reached new highs. Against the background of this atmosphere, domestic steel-producing enterprises are limited by restrictions on the production of environmental protection, but the effect of the restrictions on production is not significant. . In the first two weeks of November, the blast furnace operation rate of 100 small and medium-sized steel companies nationwide was 86.25%, down 0.2 percentage points compared to October (86.45%) , but it was still 7.75 percentage points higher than in the same period last year. Steel production in November could recover.

Steel prices have continued to rise since November Source: Lange Steel Network

  Zhongtai SecuritiesThe research report shows that recent economic fundamentals are better than market expectations and that inventory and transaction data still reflect strong demand, which could be related to the delay of this year’s warm winter and off-season. With the onset of widespread snow in the north, future demand will gradually shift to the off-season. The depletion of social inventories is expected to slow down in late November. There is no obvious correlation between seasonal changes in demand and prices. Previously high social stocks were digested to a considerable extent before the off-season and stock pressure eased. As long as demand does not deteriorate significantly from year to year, prices are expected to remain strong in the short term.

Institutions recommend paying attention to steel stocks

The Zhongtai Securities Research Report pointed out that, unlike the cost push in the third quarter, the current round of steel price increases has led to an improvement in steel profitability per ton, benefiting in particular from the appliance boom. downstream and cold rolled varieties with limited capacity increases. It returns to a relatively high level and the profitability of the sector is expected to rise to a higher level in the fourth quarter, and you can continue to pay attention to the steel stock market.

It is worth noting that since the high season cycle of “Golden Nine-Silver Ten”, the share prices of many listed steel companies have risen significantly. Especially since November, steel stocks, representative of the cyclical sector, have achieved good excess returns.

Wind data shows that the steel index (886012) has increased by 15.45% in one month since November. between them,ST Fugang(Protection of rights),Hegang ResourcesFangda special steelShagang7 listed steel companies have risen by more than 30% in the past 60 days.

Image source: Wind

Pan Helin, executive dean and professor at Zhongnan University’s Institute of Digital Economics of Economics and Law, pointed out in an interview with a China Securities News reporter that the valuation of the steel sector is moderate at this stage. The steel industry is a relatively mature industry and its valuation should be around 10-15 times under stable conditions. If the global epidemic clears up and the economy recovers, there will be a good increase in demand in the next period of time, so it’s optimistic in the medium term, but it’s still a long-term surplus industry.

Pan Helin predicts that the steel stock market outlook is likely to diverge. Among these, affected by overcapacity, the performance of listed companies with crude steel as their main output product will fluctuate with the price of steel, which is a typical feature of the industry cycle. However, some steel companies are expected to gradually enter the fine steel field through processing and extend downstream of steel products through process improvement and research and development, instead of simply exporting crude steel products. Such companies will weaken in the future and gradually increase their competitiveness.

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