Quantity and price rise in the iron and steel industry to explain the story of "salty fish turning over"

Perhaps the steel industry is not the most profitable industry in the first half of the year, but it is not an overstatement to call it the biggest bright spot in the mid-term report. In all industries that have suffered disastrous operations and overall losses last year, the industry’s most recent report Good interpretation of the story of the turn of salted fish. In the first half of this year, the economy stabilized and rebounded, and downstream demand was substantially released. The steel industry picked off the hat of the “lossy owner” in one fell swoop. The middle report showed that most steel companies turned losses into profits and realized a brilliant turnaround in performance.

Volume and price rises together to make steel companies "turn over"

According to the statistics of WIND information, the 33 steel companies included in the statistics achieved a total operating revenue of 624.903 billion yuan during the reporting period, an increase of 41.09% year-on-year; an operating profit of 25.535 billion yuan, a year-on-year increase of 4.54 times; sales gross margin of 9.73. %, an increase of 5.14 percentage points from the same period of last year; net profit of 20.768 billion yuan, an increase of 3.79 times, and a weighted earnings per share of 0.1964 yuan.

Among them, Baosteel, Anshan Iron and Steel and other industry leaders have taken the lead and achieved significant growth in performance. Data show that in the first half of the year, Baosteel Co., Ltd. (600019) realized a total consolidated profit of RMB 10.84 billion, a net profit attributable to listed companies of RMB 8.05 billion, an increase of 11.1 times from the same period of last year; Angang Steel (000898) reported a total operating revenue of RMB 0.8898 over the reporting period. 44 billion yuan, an increase of 46.59% over the same period of the previous year, net profit attributable to shareholders of the parent company reached 2.75 billion yuan, an increase of 175.94%. In the first half of the year, Hebei Iron & Steel (000709), the new “predator” who completed the first release of the interim report, also delivered a good report card. According to the report, the company’s operating income was 58.685 billion yuan in the first half of the year. , a year-on-year increase of 43.43%, a net profit of 720 million yuan, a year-on-year increase of 974.89%.

In terms of gross profit margin growth, 24 steel companies included in the statistics included 24 steel companies saw an increase in gross profit margin in the middle of this year, among which Angang Steel (12.04% growth) and Baosteel (9.70% growth) still performed most prominently. .

Regarding the reasons for the mid-term earnings report of the steel industry, industry analysts tend to agree on the one hand, on the one hand, the macro economy and steel demand continued to recover in the first half of the year, the domestic steel mills’ enthusiasm for production increased, and steel production continued to hit a record high; On the other hand, steel prices are strongly driven by factors such as the full start-up of demand, high cost support, and market expectations.

This point of view is also confirmed in the steel company's mid-year report. “The substantial increase in performance was due to a 23.2% year-on-year increase in sales of steel products and a 11.6% year-on-year increase in gross profit margin for steel products.” The Baosteel’s mid-year report showed that the rapid increase in gross profit margins is undoubtedly the steel price under rigid demand. The strong rise covered the result of rising costs over the same period.

"Worry for the worry" highlights the pressure of the industry

It is worth noting that, despite the fact that the interim results have exceeded expectations, the mid-year report of steel companies is not merely a sign of good news. Concerns about late-stage performance also appear from time to time. “In the first half of the year, supported by macroeconomic policies, the degree of prosperity of the steel industry has recovered, and the sales volume of listed companies has increased. The sales gross profit margin is at a historically high level. However, it is worrying that due to the pressure of rising costs in the second half of the year, Increasingly, with the weakening of iron and steel enterprises' ability to transfer downstream prices, it is estimated that the future gross profit margin may still decline.” Some analysts expressed to the author. Obviously, for the changes that may occur in the business environment of the industry, companies have a sensitive understanding, which makes it difficult to simply immerse themselves in the joy of “turning over” in the first half of the year.

Hebei Iron and Steel clearly stated in its mid-year report that at present, the steel industry is still facing sharp contradictions in overcapacity and competition in the industry is becoming increasingly fierce; the “scissors” formed by high ore prices and low steel prices are difficult to change in the short term, and the earnings outlook of steel companies cannot be tolerated. Optimism; overseas trade protectionism continues to intensify, the country's export tax rebate policy adjustments, and the export situation of steel products are severe and many other issues.

Statistics show that among the steel companies with increased gross profit margin in the first half of the year, five companies issued their third-quarter earnings forecasts in advance, of which three were pre-happy and two were pre-feared, and even pre-joyed companies had the facts. There is no worry at all. For example, Anshan Iron and Steel Co., Ltd. revealed in its mid-year report that it expects to realize a cumulative net profit of 2.3 billion yuan to 2.9 billion yuan from January to September. Analysts said that it is important to note that Anshan’s net profit has reached 2.75 billion yuan in the first half of the year, which means that Angang’s quarterly earnings in the third quarter are expected to be difficult to achieve rapid growth, and they will be caught between profit and loss. The same is true for Baosteel's “pre-happiness”. The mid-year report shows that its third-quarter net profit is expected to increase by 140% to 160% year-on-year. Combined with the same period last year, Baosteel’s third-quarter net profit is expected to be 8.8 billion to 9.6 billion. Between yuan. Taking into account that the reported net profit has reached 8 billion yuan, which also means that its third-quarter single-quarter performance may decline significantly.

In fact, an industry information bulletin released by the China Iron and Steel Association has already made steel companies report a "discount" in the news of their losses. This report shows that in the first half of this year, the sales profitability of 77 large and medium-sized steel enterprises was only 3.47%, which was lower than the average profit level of China's industrial sector. The industry was still in a low-profit status.

From the end of April, the high inventory and the expected change in demand downstream of the new policy of real estate regulation have caused the high prices of steel products to fall. When the price no longer supports high costs, the steel industry becomes a “sandwich cake”. Under the dual pressures of upstream and downstream, the benefits that can be enjoyed in the middle are increasingly “thin”.

Policy effect will support stabilization of steel prices

However, the stabilization of steel prices since mid-July gave hope for some market players to improve. Industry analysts at CITIC Securities (600030) believe that July will be the worst month for the steel industry this year. After the rise in steel prices since mid-July, the steel industry is expected to gradually emerge from the trough, and it is expected that the steel industry will be able to achieve low profit in the third quarter. As for the fourth quarter, the profitability of the steel industry may be expected to be met with the implementation of measures to eliminate backward production capacity and housing. Obviously improved.

In addition, more analysts have recently put the hope of supporting steel prices at the policy level.

Ping An Securities analyst said that the rise in steel prices started in July was basically a period driven by intermediate stocks. If there is no new factor boosting in the later period, the upward momentum will gradually decrease. And this wave of steel price rises is similar to the beginning of this year. The increase in cost is almost in sync with the increase in steel prices, and the profit per ton of steel in the steel price increase cycle has not been significantly expanded. The next possible reduction in energy conservation and emission reduction will be due to supply contraction. While favorable steel prices are rising, the decline in demand for iron ore will suppress the increase in costs and may be conducive to the improvement of the benefits of the steel.

The industry researcher of Huatai United Securities has more clearly explained the reasons why the steel industry may benefit from the policy goal of energy saving and emission reduction. In the first half of 2010, the energy consumption per unit of GDP in China increased 0.09% year-on-year, which means that In the second half of the year, approaching the “Eleventh Five-Year Plan” stage of the work-in-progress, it is extremely difficult for the target of reducing consumption to finish on schedule, and the government must adopt extraordinary measures. We expect the most effective measure is to shut down heavy energy-consuming heavy-industrial enterprises and bear the brunt of the steel industry.

“It is expected that the current phase-out policies such as the elimination of backward production capacity and limited power production will continue in the latter part of the period, and efforts will increase until a substantial decline in steel production occurs. In this way, in the context of supply contraction, with the demand for the season The increase in sexual recovery and the implementation of affordable housing have provided strong support for steel prices, coupled with the slowdown of cost pressures such as iron ore, and the performance of steel companies is expected to obtain strong support, he said.