Steel Industry: Macroeconomic Uncertainty Leads to Fluctuations in Steel Prices (Attached Shares)

Average daily production of crude steel fell. The average daily output of crude steel was 1.9352 million tons, a decrease of 0.76% from 1.95 million tons in mid-July, and 14.70% higher than the average level of 1.687 million tons in 2010. The average daily steel production was 2.5711 million tons, which was an increase from 2.5519 million tons in mid-July. 0.98%, 19.25% higher than the average level of 2.1611 million tons in 2010;

The sales volume in the current month rose. The daily sales volume of steel in 76 key steel enterprises was 1.5311 million tons, an increase of 19.14% from the previous month's average of 1.285 million tons in July and 32.59% higher than the average level of 1.1552 million tons in 2010.

The inventory of key steel companies dropped significantly. The steel inventory of 76 key steel enterprises was 8.06 million tons, which was a decrease of 12.00% from the 9.16 million tons in mid-July. The inventory at the end of the ten days was equivalent to a daily output of 5.13 days, a decrease of 0.75 days from the 5.88 days in mid-July and an average of 6.28 days from the 2010 average. Less 0.40 days, ending stocks amounted to 5.26 days of daily sales, 1.87 days less than the 7.13 days in mid-July and 2.18 days less than the 2010 average of 7.44 days.

Steel prices fell month-on-month. The average selling price of steel of 76 key enterprises was 5,078 yuan/ton, down by 8 yuan from 5,060 yuan/ton in mid-July and 13.33% higher than the average price of 4,481 yuan/ton in 2010.

Investment Strategy: S&P's unprecedented adjustment of U.S. sovereign credit ratings over the past 100 years has exacerbated the worries of the U.S. economic recovery. The probability of further deterioration of the global debt crisis has increased, and the pace of economic recovery in Europe and the United States will be somewhat delayed. We expect that the decline in international commodity prices will, to a certain extent, ease the pressure of high production costs for steel smelting. From the inventory point of view, social inventories are still maintaining small fluctuations, and steel mill stocks have fallen sharply during the current ten-year period and fell to low levels during the past ten years, indicating that downstream demand is still strong;

Although the international macro-level fluctuations have increased, the maximum points of view for steel demand in the second half of the social housing and water conservancy construction have been basically determined. Therefore, we maintain our investment rating on the steel industry. Iron ore resources, long products, regions, and reorganization will be the themes. The most promising are Shagang (002075), Hebei Iron and Steel (000709), Sangang Dawning (002110), Panzhihua Steel Vanadium and Titanium (000629), Bayi, Xinxing Ductile Iron Pipes. (000778), Daye Special Steel (000708).

Risk factors: Steel prices fluctuate significantly under the influence of tightening macroeconomic controls and downstream demand.