Event
On February 19, CSRC approved Shanghai Futures Exchange for wire and deformed steel bar futures trading. Meanwhile, newspapers and media reported that Chinese government would issue multiple policies to encourage Baosteel, Anben and Wuhan Iron and Steel to play leading role in domestic united restructuring.
Our Analysis and Estimation
Introduction of steel futures will change current pricing system.
Pricing system of China’s steel is similar to that of
iron ore, which takes factory price of steel as the agreement price (1-3 months); so large-scale steel enterprises have the right to price steel.
Futures market has the function of price discovery, so introduction of steel futures is sure to change current pricing system.
Introduction of steel futures is favorable to suppliers & purchasers as well as traders in circulation field.
Steel futures provides tool of risk avoidance for steel-related enterprises.
Introduction of steel futures can help optimize industrial structure and eliminate backward capacity.
Also, the introduction increases risk of enterprises operation and promote merger and restructuring of marketization.
Combination in steel industry will catalyze market of steel blue-caps.
Steel futures will directly favor Tangshan Iron & Steel (000709), Beijing Shougang (000959), Inner Mongolia Baotou Steel Union (600010), Laiwu Steel (600102), Anyang Iron & Steel (600569), Handan Iron & Steel (600001), Maanshan Iron & Steel (600808) and Nanjing Iron & Steel (600282), etc.
Investment Suggestion
We maintain “Recommended” rating for the counter.