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2014 Annual Report of the steel industry investment strategy

Investment Highlights

From the industry perspective, the upstream iron ore two core issues facing the steel industry overcapacity in extrusion and gradual improvement. With the production of iron ore production capacity, we believe that 2014 was the turning point in the supply of iron ore, ore price will be under the central level.
insufficient supply is a core factor in ore prices upward. Global iron ore investment cycle lags behind the steel investment cycle, and the construction period is longer than steel construction period, resulting in the steel construction period will begin in a continuous shortage of iron ore supply status, the last five ore supply gap has always existed. From the beginning of the end of the four
13 new mine 168 million tons of new capacity to gradually put into the period, we add a conservative calculation in 2014 was about 130 million tons of ore supply, the corresponding additional 084 million tons of pig iron. We believe that the new capacity will not
suppliers to delay delivery of the so-called conspiracy. Mine the long investment cycle, high debt ratio of new mines and heavy asset characteristics lead to full production is the optimal choice. FMG new entrants to expand production capacity from 055 million tons to 155 million tons in 2014, corresponding to the cash cost per tonne by the 12-year high of 53 down to $ 33, in addition to the huge financial pressure on new mines also produced one of the reasons for its full load.
we projected in 2013 the steel industry capacity utilization increased by about 3-5 percentage points over 12 years, while in the environmental pressures and capacity constraints compression policy, production capacity fell sharply in 2014, within two years of watching the industry capacity utilization Continuing upward more determined.
according to Societe Generale for 14 years, 19% of fixed asset investment growth judgment under neutral assumptions we predict 2014 crude steel apparent consumption of 783 million tons, year on year growth of 6.7%, crude steel production of 828 million tons , year on year growth of 6.1%.
structural factors affecting the industry is gradually improving, especially iron ore supply and demand is improving, bringing industry profitability continued to improve. We think we can take an active interest in the industry better quality, higher dividend rate and had no history of its own mining company, focusing on recommended; addition, we are optimistic about the development of the oil and gas industry to bring investment opportunities related to pipeline companies, a key recommendation.
Risk: Mine production release schedule below our expectations









风险:矿山产量释放进度低于我们预期,2014 Annual Report of the steel industry investment strategy Crazy Stone is no longer crazy.