August crude steel production of 58.74 million tons, an increase of 14%. Steel production 77 million tons, an increase of 12.9%.

August China's exports of steel 4.19 million tons, representing a reduction of 250,000 tons in July, compared with last year increase of 49.6%. January to August, China's total exports of steel 32.94 million tons, an increase of 6.5%. August China imported 1.35 million tons of steel, compared with July increased by 11 million tons, an increase of 2.96% over last year. January to August, China's total steel imports 10.62 million tons, down 5%.

Steel production and sales of seasonal decline

August crude steel production of 58.74 million tons, an increase of 14%, but lower than in July were down 0.91 percent. Domestic steel consumption as a whole still showed high water.

August steel production fell in line with our summer steel consumption is expected to decline from the average daily crude steel output, the August average daily crude steel production was 1.895 million tons, lower than the 1.9 million tons for the first time this year, indicating that pulling steel power consumption low.

From the consumer perspective, consumption growth significantly in August was 11.3% last month fell 4.1 percentage points, mainly due to the growth rate of fixed asset investment continued to decline, 1--8 in fixed asset investment growth of 25%, for 3 months of decline. Railway investment fell 15.5%, indicating that infrastructure slowed obvious.

August China's exports of steel 4.19 million tons, representing a reduction of 250,000 tons in July, compared with last year increase of 49.6%. January to August, China's total exports of steel 32.94 million tons, an increase of 6.5%. August China imported 1.35 million tons of steel, compared with July increased by 11 million tons, an increase of 2.96% over last year. January to August, China's total steel imports 10.62 million tons, down 5%.

First, the world economic recovery increased uncertainty, unfavorable demand for steel. Secondly, domestic steel prices continued to narrow, is not conducive to steel exports. Finally, the decline in exports in line with our expectations, we expect export control 300-400 ten thousand tons more reasonable.

We have repeatedly emphasized in the steel surplus period, the impact of seasonal factors on the steel market is more obvious. July and August are summer demand continued to decline, the market is not tepid. From now on, since the second half of the 9 - November there is a seasonal peak demand, steel prices, or may be re-rise. From the historical data, the growth in steel demand is relatively high, the annual peak demand generally appear in the second half of the season, but due to declining demand growth, we believe that peak demand in the second half of this year, difficult to surpass the high demand in the first half of points, which would also restrict the profitability of the steel industry upgrade.

Industry profits have remained relatively stable

Because from the beginning of 2009, within three years is not approved the construction of new production capacity, coupled with backward production capacity this year production growth of around 30 million tons, and this year demand growth is expected at 50 million tons, making the overcapacity situation faced by relief, but still production of relative surplus era, we call surplus capacity.

Because there is surplus capacity exists in high seasonal demand, the production release, but discontinued or reduced during the low season, the automatic adjustment of demand and supply, during the peak season, it is difficult to gain a substantial increase in steel, and in the off-season, steel companies difficult now massive losses. The possibility of the steel industry remained stable larger profit.

Medium-sized enterprises from profit point of view, since last October, the profitability of the steel industry basically at about 3 percent, especially since this year, monthly earnings stable at between 2.8% -3.1%. We believe that this situation may continue, even if the decline in demand for off-season, but is relatively stable.

Since the fixed asset investment growth rate of decline, the decline is more evident in infrastructure, building materials and other long steel prices have been somewhat sluggish trend. However, due to recovery in the performance sheet PMI index was slightly better than longs, but it does not mean that the sheet have obvious advantages. Long products continued to perform better than the plate has lasted more than six months, longs continued high supply, with the decline in demand for long products prices are low is a trend. A prolonged slump at the plate in the process mainly due to large overcapacity pressure, difficult to change in the short term. Sheet is due to the recent downturn relatively well due to building materials.

Judging from the recent market price adjustment, Baosteel September 13 continue to increase sheet steel, and to Shagang cut its rebar prices, represented a discount or subsidy, this change also reflects the market.

59.09 million tons of iron ore imports in August, an increase of 4.54 million tons last month, an increase of 8.3%. Imported iron ore prices continue to increase, the average price of iron ore imports in August was $ 174 / ton. But overall, imports of iron ore prices were relatively stable.

First of all, not a substantial increase in imports of iron ore increased demand. Secondly, domestic ore price spread widening, domestic ore prices sharply higher, making imported ore price is relatively cheap, has become the main reason for substantial imports. Finally, iron ore port stocks continued high, does not have a substantial increase in the import conditions, while port inventory and no significant drop, but also that there is no significant increase in steel production and signs.

Maintain "cautiously optimistic" rating

At present, the steel industry sector overall valuation sharply down, PB is 1.2, lower overall valuation level, many companies and even below the net assets. Currently, the demand for the coming season may increase demand for steel, we expect demand for smaller new season, the second half of this year will be lower than the consumption of the first half. But even if steel prices up, also rose, but rising profitability of steel companies is difficult to increase in raw material costs.

Currently Steel "three high and one low" performance significantly. Yields remain high, steel prices remain high, costs remain high, but relatively low profits. Currently, the stock began to rise, even though the steel market demand for the coming season is also difficult to have better performance. Recent flat steel long products better than the market, mainly due to the decline in infrastructure, and the PMI index has rebounded, plates pre been relatively depressed, but more serious excess sheet, flat sheet profit was still lower than construction steel.

Due to the steel industry remained relatively stable earnings, we maintain the industry cautiously optimistic rating. Currently, due to the decline in investment in fixed assets, so that the start of construction steel was weak, the steel industry performed relatively well, the main recommendation of Baosteel (4.99, -0.06, -1.19%), Daye Special Steel (13.05, -0.16, - 1.21%), Bayi Iron & Steel (10.87, -0.43, -3.81%), Xining Special Steel (10.25, -0.25, -2.38%), Xinxing Ductile Iron Pipes (8.27, -0.13, -1.55%).