China Steel Weekly:Steel mills resume production immediately after the APEC meeting

Most steel mills resumed production last Wed. after the APEC meeting。

    Most steel mills in Hebei and Shandong province that received notification to cutproduction during the APEC meeting resumed production last Wed., immediately afterthe APEC meeting. We expected the supply disruption will have limited impact to steelprice as the production cut is only temporary (3-4 days), and some downstreamindustrial activities were also stopped during the meeting.

    Steel mills are bearish on steel price and expect limited raw material restock

    We visited steel mills, domestic iron ore mines in Hebei province last week at UBScommodity tour, most steel mills we talked are cautious about steel market till year enddue to weak demand, especially for long products. They also have bearish view on steeldemand in 2015, as after all the stimulus policies, the property sales rebound is weakerthan expected, and is also difficult to be translated into higher new starts consideringthe current high property inventory. In addition, steel mills expect year-end restockingof raw material this time will be of smaller scale comparing to previous ones, as peoplehave bearish outlook on raw material prices and most steel mills are stretched onbalance sheet.

    Remain cautious and expect industry's earning to decline QoQ in Q4

    We maintain cautious view on China steel sector, and expect the industry's profitabilitywill decline QoQ in Q4. We have a Sell rating on Angang (347.HK) mainly because ofhigh valuation, and a Neutral rating on Maanshan (323.HK). Baosteel remains our toppick in the China Steel sector based on its long term growth prospects and leadingposition in the auto sheet market, to protect margin and production growth from theZhanjiang project.