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时间:2019-09-11 21:07来源:股票金融
China Pulse Check: Steel – Heating season production cuts showingeffects; sector to seetight supply-demand balance in low season;earnings to remain high 上海时时乐全天计划 ,The world’s steel supply has been moving in tandem w

China Pulse Check: Steel – Heating season production cuts showing effects; sector to seetight supply-demand balance in low season; earnings to remain high

上海时时乐全天计划,The world’s steel supply has been moving in tandem with demand since 2016,auguring well for prices.

Prices surged most in the south as peak season coming.

    We think the steel industry will see weakness in both supply and demand in Jan 2018, though a tightbalance should be reached as the contraction in supply will likely outpace the decline in demand. InJan, we expect steel prices to remain stable and iron ore prices to weaken slightly, with overallindustry earnings to remain at a high level. Our stock picks for Jan 2018are Fangda Special SteelTechnology, Nanjing Iron & Steel, Angang Steel, Maanshan Iron & Steel and Beijing Shougang.

    China is likely to expand fiscal spending to boost the domestic economy, given areaffirmation of a neutral monetary stance by the central bank there and a secondleadership transition slated for October. Steel demand should rebound as theXiongan New Area development and ‘One Belt, One Road’ policy take shape.

    8M17 China cement production reached 1.54bn tonnes, down 0.5% YoY. Aug cement production declined 3.7% YoY, which we believe was due to 1) high precipitation and typhoon in Aug; and 2) impact from the 4th central environmental protection inspection. We maintain our 2017E demand forecast of 2.4bn tonnes on assumption of stabilizing slowdown of growth in infrastructure and property investment. Peak season of the industry has started since end-Aug, as inventory to storage ratio in China dropped to 62.5%. Cement prices rose 2.6% WoW/ 28.7% YoY for this week.

    Environmental: Environmental protection costs incorporated into industrial production costsfrom 2018

    Iron ore price declines owe mostly to concerns over rising supply—they startedafter China’s iron ore production turned to growth after shrinking for two years. Yet,we expect steel spreads to stay relatively solid (vs past cases of price declines)given: 1) Chinese miners’ low cost competitiveness; 2) prospects of fiscalexpansion in China; and 3) rising iron ore and correcting steel supplies.

    4Q upbeat and FY industry earnings to exceed RMB70bn.

    From 2018, the environmental tax and pollutant discharge permits will come into force, meaning thatenvironmental protection costs will be fully incorporated to the industrial production system. Asstrengthening pollution treatment has been listed among the three key tasks for well-off societydevelopment, the discharge of major pollutants has continued to decline significantly. Following thesteps of the power industry, non-power industries are likely to carry out ultra-clean facility renovationin 2018-2019; meanwhile, ongoing supply-side reform has increased profits for leading non-powerfirms, giving them cash to make relevant investments.

    Company-specific issues include: 1) rising earnings at Posco’s subsidiaries; 2)auto-use steel plate price hikes at Hyundai Steel; and 3) recovering oil countrytubular goods exports at Seah Steel. We choose Posco as our 2H top pick, as itshould enjoy high operating leverage when the industry turns around. Meanwhile,Seah Steel deserves attention as it should benefit from a recovering US rig count.

    Demand will recover and the cement industry will enter the traditional peak season after summer/rainy season & environmental protection inspection. Production in the South is expected to continue until CNY, while production curb will take place in the North in Nov. 4Q cement & clinker supply will be tight on off-peak production & environmental policies. With the improving demand & supply and coal prices at high levels (RMB585-600/tonne), we expect cement prices to rise further in 4Q. Sales in East China will benefit from the longer production curb in the North. We raised industry earnings forecast this year, anticipating earnings of RMB71bn, up 37% YoY. If 4Q cement prices beat 2Q, the industry's goal of RMB80-100bn could be met.

    SE China Positive, Industry Consolidation Opportunities.

    Given the stable demand and longer production time, East and South Central China could have good harvest in 4Q. At present, the inventory ratios of East and South Central China are down to 57.5%/60.3% while cement prices up 4.6%/2.5% WoW. The eastern region would be more likely to benefit from the production curtailment of the northern region during Autumn/Winter. Recommendation: we remain positive on Conch Cement on stable earnings, TP at HK$35 (12.5x 2017E P/E). We suggest paying attention to regions with good performance (South-eastern China) as well as opportunities from industry consolidation.

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