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Due to the increase in the spread of international and domestic steel products, the volume of steel exports in the March-April period rose rapidly and increased year-on-year. In April, the domestic steel market prices accelerated again. This round of price increase was mainly due to the fact that the supply of domestic resources remained at a low level after the increase in the number of steel exports.
Due to the rapid growth in exports, the overall domestic demand for steel products has grown slightly ahead of schedule, and social stocks have been digested. Steel stocks have dropped significantly. Among them, the inventory of wire rods and steel bars decreased most significantly, with a decrease of 28.68% and 16.71%, respectively.
As the international steel price increase is higher than the domestic level, the price difference between domestic and foreign countries has further widened. At the beginning of May, the difference between the international and domestic steel price indices reached 104.93 points, an increase of 54.82 points over the beginning of the year. The plate index was 84.35 points, and the long products index was 140.51 points. The increase in international and domestic spreads will forcefully stimulate the domestic steel market.
From the perspective of the operation of the downstream steel industry, major industries are gradually emerging from the impact of the snowstorm at the beginning of the year, and the industry's growth has rebounded. However, due to the rise in steel prices and monetary tightening, the crowding-out effect on downstream industry production should be closely watched.
From the ring index, the profitability of listed steel companies in the first quarter of 2008 was significantly higher than in the fourth quarter of 2007. Operating income increased by 9.1% month-on-month, and net profit attributable to owners of parent companies increased by 16.1% from the previous quarter. Gross profit increased by 8.8% from the previous period, and net profit rate increased by 9.4%. This was mainly due to the large increase in steel prices in the first quarter, which fully covered the increase in the price of raw materials in the first quarter, and the profitability rebounded from the previous quarter.
Overall, the fundamentals of the domestic and international steel industry will ensure that steel prices will continue to operate at a high level in the second quarter. Continue to focus on steel listed companies and leading steel companies with lower cost advantages, and companies with asset injection expectations.
China's steel production growth rate remains low
In April, the country’s output of pig iron, crude steel and steel were 41.27 million tons, 44.68 million tons and 51.61 million tons, respectively, an increase of 9.1%, 10.2% and 11.7%, respectively, and a decrease of 0.62%, 0.42% and 1.44% respectively.
Although the year-on-year growth rate of production in March and April rebounded from January-February, the cumulative national pig iron, crude steel, and steel production from January to April increased by only 8.7% year-on-year, 9.4%, and 11.8%, still significantly lower than the same period last year. In the same period of last year and the growth rate of last year, the growth rate of China's steel production maintained a low level.
Steel exports rose month-on-month and domestic stocks fell
In January-February, affected by factors such as the Spring Festival and the snow disaster, the number of steel exports has been at a relatively low level for a year. However, due to the increase in the spread of international and domestic steel products, the volume of steel exports in the March-April period rose sharply and rose year-on-year.
The net import of steel in March was 2.63 million tons, an increase of 41.4% over the previous period. Exports of steel in April were 2.07 million tons, a year-on-year increase of 149%, which was lower than in March; steel imports were 2.56 million tons, down 24.5% year-on-year. In April, net imports amounted to 3.28 million tons, an increase of 24.7% from the previous quarter.
Steel Industry: Profitability Qoq Increase Investment Strategy Report
From January to April, the country’s cumulative pig iron production, crude steel, and steel production only increased by 8.7%, 9.4%, and 11.8% year-on-year, still significantly lower than the same period of last year and the growth rate of the previous year, and the growth rate of China’s steel production remained at a low level.
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