The ore negotiations are nearing completion, and Vale is proposing a 90%-100% increase, which will undoubtedly increase the cost pressure on steel mills. Domestic steel prices have risen sharply in recent weeks, reflecting the fact that steel companies are beginning to shift costs downstream. As an important downstream of steel, the cost of the machinery industry is of concern.
CICC believes that the rise in steel prices has a dual impact on the machinery industry. On the one hand, the rise in steel prices directly squeezes the profit margin of the machinery industry; on the other hand, the period of rising steel prices is accompanied by the downstream demand of the machinery industry. Therefore, the rise in steel prices does not mean a decline in the profit margin of the machinery industry.
Overall, steel costs account for 6% of the cost structure of the machinery industry (excluding steel products such as castings and forgings, parts and semi-finished products, and only direct steel procurement costs). In terms of the molecular industry, the cost of steel for containers and ships is the largest, followed by heavy machinery, machine tools, construction machinery, and port machinery. Railway equipment accounts for a relatively small proportion.
According to historical experience, in the period of falling profit margin, for every 10% increase in steel prices, the profit rate of the machinery industry will fall by 0.64 percentage points. Among them, the profit margins of instrumentation, engineering machinery, internal combustion engines, petrochemical general, machine tools and other sub-sectors have declined. The profit rate of sub-sectors such as agricultural machinery and cultural office supplies declined slightly.
Although steel is a raw material for the machinery industry on the one hand, the rise in steel prices directly affects the cost of the machinery industry; but at the same time, the rise and fall of steel prices is also a direct reflection of the degree of economic prosperity. From the perspective of the downstream demand structure of the steel industry, real estate, infrastructure and machinery, home appliances, automobiles, ships and other manufacturing industries are the main sources of demand. If the demand for steel prices rises, it reflects the increase in the degree of prosperity of the relevant downstream industries, and the economic boom of these industries will directly drive the machinery industry such as construction machinery, machine tools, metallurgical equipment, parts and components, instruments and meters. Therefore, the period of rising steel prices may also be a period of good downstream demand in the machinery industry.
CICC pointed out that the rise in steel prices in different periods has different effects on the profit margin and stock price of the machinery industry. In the industry recovery phase, the moderate increase in steel prices means the recovery of downstream demand, the economies of scale increase the profit margin of the industry, and the trend of the mechanical sector is basically synchronized or outperforms the market. In the peak of the mechanical industry boom, steel prices are often faced with regulatory pressures, and the machinery industry tends to underperform the market. From the characteristics of the steel price (ordinary plate) in the previous cycle, the steel price fluctuates below 5,000 yuan/ton (equivalent to the level of 2007), and the profit rate of the machinery industry will not be greatly affected, exceeding 5000. In yuan/ton, the profit margin will have a large negative impact, and the stock price will also be negatively hit.
Looking forward to 2010, the rise in steel prices has limited impact on the profit margin of the machinery industry. In 2010, the price of steel was mainly below 5,000 yuan/ton. In addition, China's machinery industry has not reached the peak period of the boom, and the room for improvement in scale effect still exists. The machinery industry still has good performance.
In addition, Industrial Securities pointed out that the listed companies in the machinery industry surveyed have basically learned the lessons of 2008 and have begun to reserve steel at low levels. Therefore, the erosion of steel prices this year is not obvious to the industry profits. At the same time, the corresponding product loader has increased the price, the excavator is ready to raise the price, and in the context of good demand, the machinery industry can be free from the impact of rising steel prices.
CICC believes that the rise in steel prices has a dual impact on the machinery industry. On the one hand, the rise in steel prices directly squeezes the profit margin of the machinery industry; on the other hand, the period of rising steel prices is accompanied by the downstream demand of the machinery industry. Therefore, the rise in steel prices does not mean a decline in the profit margin of the machinery industry.
Overall, steel costs account for 6% of the cost structure of the machinery industry (excluding steel products such as castings and forgings, parts and semi-finished products, and only direct steel procurement costs). In terms of the molecular industry, the cost of steel for containers and ships is the largest, followed by heavy machinery, machine tools, construction machinery, and port machinery. Railway equipment accounts for a relatively small proportion.
According to historical experience, in the period of falling profit margin, for every 10% increase in steel prices, the profit rate of the machinery industry will fall by 0.64 percentage points. Among them, the profit margins of instrumentation, engineering machinery, internal combustion engines, petrochemical general, machine tools and other sub-sectors have declined. The profit rate of sub-sectors such as agricultural machinery and cultural office supplies declined slightly.
Although steel is a raw material for the machinery industry on the one hand, the rise in steel prices directly affects the cost of the machinery industry; but at the same time, the rise and fall of steel prices is also a direct reflection of the degree of economic prosperity. From the perspective of the downstream demand structure of the steel industry, real estate, infrastructure and machinery, home appliances, automobiles, ships and other manufacturing industries are the main sources of demand. If the demand for steel prices rises, it reflects the increase in the degree of prosperity of the relevant downstream industries, and the economic boom of these industries will directly drive the machinery industry such as construction machinery, machine tools, metallurgical equipment, parts and components, instruments and meters. Therefore, the period of rising steel prices may also be a period of good downstream demand in the machinery industry.
CICC pointed out that the rise in steel prices in different periods has different effects on the profit margin and stock price of the machinery industry. In the industry recovery phase, the moderate increase in steel prices means the recovery of downstream demand, the economies of scale increase the profit margin of the industry, and the trend of the mechanical sector is basically synchronized or outperforms the market. In the peak of the mechanical industry boom, steel prices are often faced with regulatory pressures, and the machinery industry tends to underperform the market. From the characteristics of the steel price (ordinary plate) in the previous cycle, the steel price fluctuates below 5,000 yuan/ton (equivalent to the level of 2007), and the profit rate of the machinery industry will not be greatly affected, exceeding 5000. In yuan/ton, the profit margin will have a large negative impact, and the stock price will also be negatively hit.
Looking forward to 2010, the rise in steel prices has limited impact on the profit margin of the machinery industry. In 2010, the price of steel was mainly below 5,000 yuan/ton. In addition, China's machinery industry has not reached the peak period of the boom, and the room for improvement in scale effect still exists. The machinery industry still has good performance.
In addition, Industrial Securities pointed out that the listed companies in the machinery industry surveyed have basically learned the lessons of 2008 and have begun to reserve steel at low levels. Therefore, the erosion of steel prices this year is not obvious to the industry profits. At the same time, the corresponding product loader has increased the price, the excavator is ready to raise the price, and in the context of good demand, the machinery industry can be free from the impact of rising steel prices.
Xi'an Gavin Electronic Technology Co., Ltd , https://www.gaimcmeas.com