Supply: The capacity input brought by capacity investment has been quickly opened, and the pressure on the supply side has increased. In the quarterly report, we pointed out that the cumulative growth of crude steel production in 2019 will remain above the average of 9%, while the actual production growth rate of 10.2% in the first five months is a testament to our supply growth forecast; and from the above analysis, we see To the high growth rate of 43.3% of capacity investment, the growth of crude steel output will further accelerate. The potential growth rate of the whole year is expected to be no less than 11%, and the supply growth rate is faster; and this fast-growing capacity investment is also The impact of measures such as environmental protection and production restriction is weak, indicating that capacity investment has raised the environmental protection level of steel mills to a level that meets low emission standards. In the past three years, measures such as environmental protection and production that have a major impact on supply have been The effectiveness of steel production activities has been very weak, supporting the rapid release of production, so in the second half of the year, the speed of capacity is the core of our concern.

On the demand side: affected by domestic de-leverage, fixed-asset investment continued to weaken. The fixed-asset investment supported by real estate investment in the first half of the year will also decline. The practice of infrastructure investment to significantly hedge the downward pressure on the economy is still controlled by the government. On the whole, the decline in demand-side growth rate is certain in the second half of the year, and the rhythm is still the core of our investment.

The data shows that in the first five months, the cumulative growth rate of fixed asset investment was 5.6%, which was only slightly higher than the 5.5% of the starting point of the deleveraging policy adjustment in July last year. From the structural point of view, real estate investment supported the investment in the first half of the year. In the first five months, the cumulative growth rate of real estate investment was 11.2%, which was in the high range, but the growth rate dropped by 0.3% from the previous month. From the perspective of the second half of the year, real estate investment will continue to decline in the second half of the year; Although some special bonds can be applied to capital, and leveraged financing to support infrastructure investment, in the context of the government still stressing the control of invisible debt, the recovery of infrastructure investment is limited. It is expected that the growth rate of infrastructure investment will rise to 5% in the second half of the year- At the level of 7%, on the whole, the demand side in the second half of the year showed a trend of downward trend, and the demand pressure in the off-season will be the biggest.

From the credit data, the social financing stock increased by 10.59% year-on-year, down from 11.59% in the same period of last year, and slightly lower than 0.19% last month, indicating that market financing demand is still sluggish, and the real economy financing demand is not good, which has increased. In the second half of the year, the demand situation was sluggish; the money supply also showed the same trend. The average monthly growth of M2 in the first five months was 8.4%, which was lower than the 8.44% in the same period of last year. In particular, M1 reflected the downward pressure on the real economy. The average monthly growth rate of M1 in 5 months is 2.66%, which is much lower than 8.76% in the same period of last year. This also shows that the hematopoietic function of the real economy is declining. In terms of policy, more tax reduction and tax reduction as the main means of hedging the economy, economic recovery It takes time to see the effectiveness. On the whole, we are still seeing a weakening trend in the second half of the year, and the rhythm is still the focus.

Steel exports will still be weak. According to the previous analysis, steel exports are still weak. From the performance of major overseas economies, steel exports in the later period are still under pressure. Globally, the US economy has followed the downward trend of major global economies this year, and production activities have fallen. From the manufacturing PMI index of major economies, the global PMI index averaged 50.42% in the second quarter, which was significantly lower than the 53.68% in the same period of last year. The Eurozone and Japan's economy fell below the line of glory and the economy slipped into recession. In May, the PMI data of the two countries showed that the Eurozone and Japan economies were 47.7% and 49.80% respectively, down from 55.5% and 52.8% in the same period of last year. China also fell below the line of glory for the first time since July 2016. In May, 49.4% was recorded. Therefore, the pattern of weak steel consumption in the world is clear. It is unrealistic to ease supply pressure overseas. The pressure on the domestic market will become a foregone conclusion in the second half of the year.

The rising cost of iron ore still supports the market center. The shortage of iron ore market caused by the dam break in Brazil, from the current point of view, has not yet eased, which still constitutes support for the finished product market, which also continues the view we put forward in the second quarterly report. Port inventories fell to 118 million tons, which was the same as the port inventory in mid-January 2017. 62% of iron ore land prices continued to soar to $114.25/ton, up 77.27% year-on-year; It seems that after a two-month continuous decline, the year-on-year rebound in May recorded a growth rate of 0.78%. From a global perspective, iron ore shipments recorded a growth of 1.19% in April, 5 The year-on-year growth rate reached 9.91%, indicating that the growth rate of non-mainstream mines has shown rapid growth. It is expected that the iron ore supply pressure will be eased in the second half of the year; however, in the third quarter, the pressure of iron ore shortage will still be faced, and The market constitutes an absolute support.