The three major steel companies rose in September after the price hike steel prices or shocks higher

In the second half of August, we will usher in the intensive period for the first half of the major steel companies to announce their results.

At the same time, Qi Hui, a senior analyst at Qilu Securities, said that brokers have basically lowered their ratings on steel stocks in the second half of the year.

Baosteel's moderate price adjustment helps to curb speculation

According to the latest monitoring of the spot trading platform “Nishijin Shinkansen”, as of August 13th, the offer price of quality rebar grade 3 in Shanghai has been adjusted to RMB 4,030/t, up RMB 70/t from last Friday. Nearly three months later, the steel price terminal in Shanghai again touched the 4,000 yuan/ton mark, and the half-month rebound rate was close to 10%.

On August 16, Baosteel, Wuhan Iron and Angang, the three major steel giants known as “wind vanes”, adjusted the prices of steel products in September. Among them, the leading steel and steel products of Baosteel are directly or indirectly raised by 150 yuan/ton to 800 yuan/ton; Wugang Steel has increased the price of steel products by 200 yuan/ton to 800 yuan/ton per ton since August 17; The biggest increase was 350 yuan/ton to 1,000 yuan/ton.

According to Zhu Xi'an, manager of the Iron and Steel Information Department, Baosteel's price adjustment represents their views on the current market. “It shows that Baosteel has maintained a more cautious attitude towards the steel market outlook and the steel market is not as good as it has imagined. They have adjusted their price cycles and varieties. There are reservations for the later period, which is also conducive to restraining the market from using large steel mills to adjust prices for speculation."

The industry believes that the rebound in steel prices in the first two weeks was mainly due to the increase in traders' bottoming out, but last week some of the leading steel mills have become the main force that continues to push up prices.

Hou Zhiyu of Lange Steel Information Research Center stated that with the sharp fall in iron ore prices in late April this year, steel prices have also followed a downward trend, and some steel companies have experienced the phenomenon of costs and market prices hanging upside down. At the beginning of July, Tangshan 150 billet fell to 3,370 yuan. This price has already fallen below the bottom line of 3450 yuan expected by steel traders. Therefore, traders and downstream manufacturers have begun to enter the market to make up the inventory. This wave started to rebound and rebounded. The reason is that the retrenchment funds triggered by factors such as production cuts and the impact on the costlines of steel mills have entered the market. "This wave of rise is essentially oversold and rebounded. There are some speculative factors," Hou Zhihao told reporters.

Surging performance due to low base last year

On August 18, Anshan Iron & Steel Co., Ltd., which ranks second in the domestic steel industry's total market value, will announce its semi-annual report. The performance report shows that the net profit for the first half of the year is expected to be 2.22 billion to 3 billion yuan, an increase of 242% to 292% year-on-year. Based on the stock price of 8.6 yuan on August 16th, its price-to-earnings ratio is at most 14 times, and the lowest is only 10.4 times. As of last Friday (August 13th), the average price-earnings ratio of the Shanghai A-shares was 19.62 times. In other words, compared with the broader market, Angang has a great valuation advantage.

On August 27th, Hebei Iron and Steel, which has been ranked first in the country for its total output, will announce its semi-annual report. The performance report showed that the net profit for the first half of the year is expected to reach 550 million to 800 million yuan, an increase of 475% to 737% over the same period last year.

On August 28, Baosteel Co., Ltd., which has the highest market value of the domestic steel industry, will disclose its semi-annual report. The notice shows that the net profit growth in the first half of the year was 6 to 10 times...

Other semi-annual report of the iron and steel enterprises to be announced soon, the results of a larger increase in the pre-increase rate is also disclosed on August 24 of Benxi Iron and Steel Plate, net profit of about 650 million to 750 million yuan; August 27 disclosed in TISCO stainless steel, Net profit is expected to be 800-110 million yuan....

Although the iron and steel companies performed well in the first half of the year, most analysts are not optimistic about this sector. Insiders said that the steel price outlook may fluctuate higher. However, brokers basically lowered their ratings on steel stocks in the second half of the year, while the steel sector basically left the wave in July and August.

Qi Hui, a senior analyst at the iron and steel industry, said that the assessment of whether or not a steel company really makes money is compared with the profit in the first half of 2008, because the 2009 base was too low to be comparable. In addition, the steel stocks are currently based on PB valuations, with little concern for PE. The reporter reviewed the profitability of each steel company in 2008 and found that Baosteel’s earnings per share at the time was 0.55 yuan, and this year it was only 0.44 yuan at the highest level, and the gap was more than 20%.

Luo Bing, executive vice president of the China Iron and Steel Association, revealed before his birthday that the sales profit rate of large and medium-sized steel companies in the first half of the year was only 3.47%, which was lower than the average profitability of China's industrial sector.

There are three major requirements in the second half of the year

Lange Steel's study on August 13 believes that although the current high cost of steel production has fallen, it is still at a high level compared with the past. At the end of July, the cost index for pig iron 127.9 was calculated, which was equivalent to the level in mid-March. This was the beginning of a sharp rise in the price of imported iron ore. “A lot of steel companies were losing money in June.” Hou Zhijun told reporters. “And the rise in steel prices has not magnified the volume of transactions that accompany it, which also makes it difficult for steel companies to make up for the losses of the previous period. Can it be profitable? Still see demand."

According to the data released by the China Iron and Steel Association, China's crude steel production in July was 57.74 million tons, an increase of 2.2% year-on-year; but the average daily output of crude steel was 1.669 million tons, compared with 1.79 million tons in June, the average daily production was reduced by 123,000 tons, Declined by 6.9%. This is also the third consecutive month of crude steel production decline since May and June. At present, the overall inventory of the steel industry is at historically high levels. At the end of July, social inventory was 15.56 million tons, an increase of 19.3% from the beginning of the year.

The month-on-month decline was due to the cancellation of export tax rebates by the state and the overhaul of steel equipment. According to incomplete statistics from the Lange Steel Information Research Center, there were 45 iron and steel companies that reduced their production and maintenance in July. In August, in the case of rising prices, this part of the production line is very likely to resume production.

From the perspective of demand, the volume of downturn shows that more traders are currently bargain hunters and downstream users make up the inventory, causing prices to rise. It is not true that overall demand starts. “At present, the production and sales of automobiles are declining. The regulation of real estate, coupled with high temperatures and heavy rains, have inhibited the demand for steel,” Hou Zhixi said. “However, there is still an interest in demand in the second half of the year. One is that post-disaster reconstruction has a short-term demand. One is to increase investment in the construction of affordable housing this year. There is also the fact that Jin Jiuyin 10 is approaching. Manufacturing companies will make up the inventory during this period, and finally the traditional winter storage behavior."