20180905-广发证券_香港_-China_Pulse_Check__Steel_Sector_5页_838kb

报告摘要

China Pulse Check: Steel Sector Summary

Core Content

The document provides an analysis of the Chinese steel sector, focusing on demand, supply, pricing, and investment outlook for the period leading up to the peak season. It also includes analyst recommendations and risk factors associated with the sector.

Main Views

Demand Outlook

Infrastructure Investment: Policies emphasize fiscal expansion and structural adjustments, suggesting infrastructure investment may bottom out soon. This is expected to boost steel demand.
Property Sector: Monetary policy easing is anticipated to alleviate liquidity constraints in the property market. Continued decline in mortgage rates should support property sales, thus reinforcing steel demand.
Manufacturing Demand: Ongoing capital expenditures will continue to support demand in the manufacturing industry.
Seasonal Trends: With the peak season approaching, downstream manufacturers are expected to increase capacity utilization, leading to a rise in steel demand on a monthly basis (MoM).

Supply Outlook

Production Constraints: The government's stricter environmental protection measures and implementation of production cuts are leading to a contraction in steel supply.
Output Trends: In July 2018, pig iron, crude steel, and steel output saw a decline MoM, marking the first drop in 2018. This indicates a tightening supply situation.

Pricing Outlook

Steel Prices: Steel prices rose in August, supported by strong demand and limited supply.
Iron Ore Prices: Iron ore prices also increased in August, but are expected to weaken in September due to potential oversupply or weaker demand.
Price Indices: Long and flat product price indices showed a strong rise in July, suggesting a positive trend in pricing.

Earnings and Performance

Earnings Surge: Steel earnings increased in August, driven by higher prices.
Supply/Demand Balance: The tight supply and demand balance is expected to continue into September, which should support steel prices.

Key Information

Sector Ratings

Sector Rating: Positive (expected to outperform benchmark by more than 10%)
Time Horizon: 12 months

Top Stock Picks for September

Sansteel Minguang (002110 CH)
SGIS Songshan (000717 CH)
Hunan Valin Steel (000932 CH)
Xinyu Iron & Steel (600782 CH)
Baoshan Iron & Steel (600019 CH)

Inventory Levels

Dealers' Inventory: As of August 31, key steel products inventory was at 9.96m tonnes, down 0.83% MoM and up 1.99% YoY.
Steel Plants Inventory: Steel plant inventory was at 4.36m tonnes, up 5.88% MoM and down 10.55% YoY.

Risk Factors

Economic Slowdown: A significant economic slowdown could negatively impact the sector.
Steel Exports: If steel exports fall short of expectations, it may affect demand.
Production Cuts Enforcement: Weaker enforcement of production cuts could lead to increased supply.
Iron Ore Price Cuts: Coordinated price cuts by major iron ore producers could weaken steel prices.

Key Data Points

Figure 1: 7M18 cumulative FAI growth slightly declined YoY.
Figure 2: 7M18 cumulative industrial value-added marginally declined YoY.
Figure 3: M1 growth edged down YoY in July, while M2 growth rose slightly.
Figure 4: MoM growth in cumulative ferrous metals FAI increased mildly in 7M18.
Figure 5: July crude steel daily average output dropped MoM.
Figure 6: July crude steel output rose YoY.
Figure 7: 7M18 cumulative property investment growth slightly increased YoY.
Figure 8: Noticeable slowdown in 7M18 FAI growth YoY.
Figure 9: Strong rise in long and flat product price indices.
Figure 10: Active rebar futures contracts showed strengthening in both closing and settlement prices.

Analyst Certification and Disclosure

The research analyst certifies that all views expressed accurately reflect their personal views.
No part of their remuneration is directly or indirectly linked to specific recommendations.
GF Securities (Hong Kong) does not hold shares in the mentioned securities.
No investment banking relationships with the companies in the past 12 months.
Analysts and their associates are not officers of the mentioned companies and have no financial interests in the securities.

Disclaimer

The report is for informational purposes only and does not constitute an offer to buy or sell securities.
It is intended solely for clients of GF Securities (Hong Kong).
The information may be subject to change and is not guaranteed.
The proprietary trading division may have different investment decisions from the research report.
Recipients should seek professional advice before making investment decisions.

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