The situation where there is a relative oversupply of raw materials will also be maintained, and steel mill profits are expected to pick up, driven by the dual benefits of improved demand and declining costs.
On July 17, the China Iron and Steel Association released key statistics on the production status of steel companies in early July 2024. In early July 2024, the key statistics showed that steel companies produced a total of 21.5172 million tons of crude steel, 19.2533 million tons of pig iron, and 19.791 million tons of steel. Among them, crude steel production was 2.1,517 million tons per day, down 0.73% from the previous month, down 3.96% from the same period last year, and the same caliber increased by 3.71% from the same period last year.
According to a research report released by Huafu Securities, steel supply is expected to shrink in 2024, downstream consumption is expected to stabilize, and the relationship between steel supply and demand may improve. Considering that steel products are developing in the direction of high-end and high added value; industry concentration is expected to increase further, and industry profits may bottom out and usher in recovery.
In terms of price, steel stocks are currently under little pressure, and the conflict between supply and demand is not prominent. Iron and water are expected to remain high, superimposed raw material inventories are low, and there is short-term support on the cost side. As favorable policies are gradually implemented, economic recovery is expected to accelerate in the second half of the year, and there is still support for downstream consumption to boost steel prices.
According to CITIC Construction Investment Securities's investment strategy for the second half of 2024, 1. Currently, the steel industry is focusing on three main directions: (1) Continued implementation of crude steel production control. (2) Vigorously develop high-end steel products such as high-performance special steel, promote scrap recycling, and support the development of short-process steelmaking in electric furnaces. (3) Accelerate energy saving and carbon reduction transformation in the steel industry and demonstration applications of low carbon smelting technologies such as hydrogen metallurgy. Production restrictions are an effective way to curb iron ore prices and increase industry profits.
2. Since this year, automobiles, shipbuilding, home appliances, and energy have maintained the high growth trend of last year, and direct and indirect exports have solved the problem of phased excess caused by the real estate cycle.
3. Looking ahead to gold, nine, and silver, China's export data continues to exceed expectations. As the weather cools down and the issuance of special bonds accelerates, project funding improves, infrastructure projects are likely to concentrate and catch up, and there is a high probability that prices will rise.
Meanwhile, the situation where there is a relative oversupply of raw materials will also be maintained, and steel mill profits are expected to pick up, driven by the dual benefits of improved demand and declining costs.
Companies related to the steel sector:
Angang Steel Co., Ltd. (00347), Chongqing Iron & Steel (01053), Maanshan Iron & Steel (00323), China Oriental Group (00581)