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Benefiting From The Return Of Iron And Steel Industry And Improving The Profitability Of Refractories Industry

- Dec 18, 2018 -

Refractories are important basic materials for high temperature industry, which are widely used in metallurgy, building materials, non-ferrous metals, light industry and other high temperature industries. From the downstream demand of refractories, 70% of the downstream demand of refractories is for steel industry, which is applied to blast furnace, converter, electric furnace, ladle furnace, LF furnace, RH furnace and continuous casting system. [br] [br] refractories are mainly magnesia bricks and aluminium bricks. Magnesium, aluminium and carbon are the main chemical compositions of refractories for steel and iron. At present, the consumption intensity of refractories in China's iron and steel industry is about 15 kg per ton of steel. Influenced by the implementation of environmental protection measures for magnesite mining and processing in Liaoning Province, the price of fused magnesite increased by 78% compared with the beginning of the year, and the price of magnesia refractories increased by about 30%. At present, the price of magnesia-carbon bricks is 41% away from the price in July 2008. [br] [br] upstream raw materials: environmental protection restricts productivity release [br] [br] [br]. Viewed from the upstream raw materials of refractories: magnesite, bauxite and graphite are the main raw materials of refractories, and the cost of raw materials accounts for more than 70%. Liaoning and Shandong are the main producing areas of magnesite in China; magnesite mining and processing belongs to high-pollution and high-energy-consuming industries, and magnesite has been treated in Haicheng, Yingkou and Anshan of Liaoning Province. Strict environmental protection and production restriction measures shall be implemented in the fields of mining, ore processing and refractory production. [br] [br] demand analysis: steel industry boom [br] [br] [br] steel industry boost drive refractory industry profit improvement: gross interest rate of refractory has a positive correlation with steelmaking and iron-making gross interest rate; electric arc furnace drive refractory demand growth: affected by the national ban on intermediate frequency furnaces and strip steel; some steel enterprises with capacity indicators seek new electric arc furnaces In the first half of this year, the number of orders of electric arc furnace enterprises in China increased by more than 200% compared with previous years. Therefore, the demand for magnesia alkaline refractories for electric arc furnace is expected to increase. [br] [br] supply analysis: three major barriers and environmental protection restrictions on capacity release [br] [br] [br] from the industrial status quo, China's refractory production accounted for 65% of the global total output, Henan, Liaoning and Shandong are the main refractory production areas in China; in 2015, China's refractory industry concentration rate CR10 was 8.95%; Eliminating backward capacity, encouraging mergers and acquisitions, restructuring, and improving the refractory industry concentration is the future development trend; From the perspective of industry barriers, there are three major barriers to policy, technology and market promotion: national industrial policy encourages large-scale and technologically advanced refractory production enterprises to develop and resolutely eliminate backward production capacity; overall contracting mode gradually becomes the mainstream requiring strong matching level of refractory enterprises; large iron and steel enterprises are very cautious about the choice of refractory enterprises; from the perspective of competition pattern, the owners of A-share listed companies Punai and Beijing Lier are the refractories used in iron and steel industry. The sales revenue of the two companies accounted for more than 80%. The production capacity of Punai is larger. The gross profit rate of Beijing Lier is higher than that of Punai.

VS raw material end of finished product: Refractories industry benefit demand [br] [br] From the end of finished product, steel industry boom increases demand for refractories, refractories industry environmental protection production restriction reduces supply of refractories, refractories finished product supply and demand pattern can be improved; from the raw material end, magnesite mining and magnesite smelting double production restriction, magnesite price rise on refractories industry cost pressure; From the raw material point of view, the supply and demand and profitability of iron and steel industry in the second half of the year are expected to continue, and the demand for refractories for iron and steel industry is expected to maintain, but attention should be paid to the impact of environmental protection and production restriction on the demand for refractories in Beijing, Tianjin, Hebei and surrounding areas during the heating season; the price transmission process of refractories to downstream iron and steel enterprises may have begun gradually, but due to the national refractory industry cluster. Medium CR10 is only 8.95%, industry concentration is low, market competition is extremely fierce, refractory enterprises in the process of price negotiations with iron and steel enterprises or disadvantageous position, price increases or less than expected. [br] [br] investment direction: supply and demand pattern of refractory and expected marginal improvement profit [br] [br] refractory industry supply and demand pattern and expected marginal improvement. From the structural point of view, considering the supply-side structure of the iron and steel industry from three perspectives, the impact on private enterprises is greater from the absolute and relative scale of capacity removed; in the first half of 2017, from the ten-day average output, the ten-day average output of key steel enterprises increased, the ten-day average content of non-key steel enterprises decreased, and the ten-day average output of key enterprises in the first half of 2017. It is 17663,000 tons, up 7.18% compared with the first half of 2016; the iron and steel industry; the 13th Five-Year Plan puts forward the overall goal of increasing the concentration of the iron and steel industry by more than 25 percentage points by 2020, setting a large-scale shuffling of the iron and steel industry in 2016-2020. Mergers and reorganizations, or one of the major trends in the development of the steel industry during the 13th Five-Year Plan period, will benefit its main suppliers, namely the refractory industry leader, by further increasing the proportion of crude steel output. [br] [br] steel industry prosperity and price transmission will affect the profitability of refractory enterprises. We believe that in the second half of the year, the demand for refractories in the iron and steel industry slows down steadily, the profit is expected to remain high, and the supply, demand and profitability of the iron and steel industry are expected to continue, so the demand for refractories in the iron and steel industry is expected to be maintained; the cost of refractories caused by the rising price of raw materials may gradually be transmitted to the downstream steel enterprises, but the low concentration of the refractory industry may be a constraint factor. The degree of price transmission will directly affect the profitability of refractory industry. [br] [br] Therefore, the improvement of the prosperity of the iron and steel industry and the environmental restriction of production contribute to the supply and demand pattern and the expected marginal improvement of the refractory industry. The profitability of refractory industry can be expected if the cost increase caused by rising raw material prices can be transmitted to the downstream steel industry.