It is planned to reduce the capacity-capacity conversion coefficient to facilitate the replacement of electric furnaces by converters. In this plan, the capacity-capacity conversion coefficients of converters and electric furnaces have been adjusted and reduced, but the reduction of electric furnaces is greater, which means that converters of the same capacity can be replaced with electric furnaces of larger capacity. According to our calculations, a converter with a capacity of 70 tons can only be replaced with an electric furnace with a capacity of 75 tons (replaced at 1.25:1) or 105 tons (replaced at 1:1) according to the original capacity conversion factor; After the implementation of the plan, it can be replaced by an electric furnace with a capacity of 120 tons at a ratio of 1:1.
EAF steel may welcome development opportunities, which will benefit the scrap steel and graphite electrode industry chain. The reason why the policy favors electric furnace steel is that the short-flow steelmaking process of electric furnace has obvious environmental advantages. The proportion of China’s electric furnace steel output is significantly lower than that of foreign countries. We estimate that electric furnace steel may welcome important development opportunities. In the short term, it is good for the scrap processing industry; the price of graphite electrodes has rebounded significantly and is expected to be further supported.
The latest steel capacity replacement plan is more stringent, and electric furnaces can be replaced in equal amounts. The Ministry of Industry and Information Technology issued the latest “Implementation Measures for Steel Occupational Capacity Replacement”, which has stricter controls on steel capacity replacement: (1) Strictly define the scope of equipment for capacity replacement. (2) It is necessary to “decrease” the replacement share. (3) According to the control of the total production capacity in the region, the exit equipment used for replacement must be removed in place. The plan clearly states that steel companies will replace converters with electric furnaces, and equivalent replacements can be implemented
There is no sign of relaxation in the policy, which is good for the fundamentals, and is optimistic about the fundamentals before the Spring Festival. Judging from this plan, the steel production capacity control policy continues to adhere to high pressure, and there is no sign of relaxation. The 19th National Congress of the Communist Party of China also said that it will continue to promote supply-side changes. In the short term, the environmental protection and production restrictions during the heating season will support the steel sector. We estimate that until the heating season ends on March 15th, the fundamentals of the iron and steel industry supply are expected to remain tight, while the prosperity after the heating season is bound to exist. Uncertainty. It is estimated that the earnings of listed steel companies in 2017Q4 and 2018Q1 are still relatively optimistic, and the valuation of the steel sector is low, and there may be a rebound before the Spring Festival.
Post time: Apr-22-2021