Maintain the "overweight" rating of the industry.Steel prices fell in the short term, mainly affected by cost collapse, we observed that industry profits remain at a good level, with the return of steel inventories, the plate will rebound in the short term, it is recommended to increase the holdings of industry leaders. Continue to recommend Baosteel, Xingang, Valin Iron and Steel, Fangda Special Steel and so on. From the point of view of the rising proportion of electric furnace steel, it is recommended to grow large carbon. At the same time, recommend Yongjin shares of special steel, the vast number of special materials, CITIC special steel, Fushun special steel, Yongxing materials, Jiuli specialties. In addition, to benefit from the development of liquid flow battery energy storage, Panzhihua Iron and Steel Co., Ltd. is recommended.

　　Demand rebounded and inventories returned to destocking.As of November 10 this week, the average daily trading volume of building materials was 163000 tons, and the trading volume of building materials gradually rebounded. The output of the five major varieties of steel this week was 9.1532 million tons, down 50400 tons from last week, and the steel supply remained low and volatile. On Friday, the inventory of large variety steel mills rose by 118300 tons, while the social inventory decreased by 381200 tons, of which the inventory of rebar steel mills and social inventories rose by 5.83 tons and decreased by 316700 tons, while that of hot coil mills and social inventories increased by 0.83 tons and decreased by 62000 tons respectively. Steel demand rebounded this week, downstream procurement is relatively active, the overall steel inventory returned to decline. The apparent consumption of large varieties of steel this Friday is 9.4161 million tons, up 336800 tons from last week, and the demand for steel is up a lot. By category, the demand for steel used in construction and manufacturing has rebounded. We believe that the current market has fully responded to the negative, while the demand is more resilient, steel prices may gradually pick up.

　　Industry production restrictions will continue in the fourth quarter, and the low supply pattern of the iron and steel industry will remain unchanged.According to the recently announced policy on off-peak production in the heating season of 2021-22 in Beijing, Tianjin, Hebei and its surrounding areas, the proportion of off-peak production in iron and steel enterprises in the relevant areas was not less than 30% of the output in the same period of the previous year from January 1 to March 15, 2002. According to the 30% ratio, the crude steel output of the five provinces and cities affected in the first quarter of 22 may be reduced by 27.95 million tons, while this off-peak production is more than in 8 new cities in 20 years, and the actual reduction of output caused by off-peak production may be greater. At present, the pessimistic expectation of the market for real estate has picked up in the context of policy fine-tuning, we do not expect the risk of a hard landing, steel demand need not be too pessimistic, while the cost side is still weak affected by steel supply, industry profits will remain good.

　　Manufacturing demand continues to recover.We have observed that the impact of lack of core on the automotive industry has gradually disappeared, and the demand for steel in the automotive industry will gradually pick up. In addition, the impact of dual energy consumption control and power restriction policies on the manufacturing industry is gradually fading out, and we expect manufacturing demand to gradually recover. Construction steel, the current rebar apparent consumption of low fluctuations, from the local real estate policy fine-tuning point of view, the risk of real estate demand collapse is small, later or gradually rebound. And the policy of the completion of special debt funds before the end of the year shows that the policy is paying more and more attention to the supporting role of capital construction. At present, special debts are being declared in 2022, and the special debt quota may be issued ahead of schedule in 2022, driving the steel demand of the infrastructure sector. Later construction steel demand may gradually recover.

　　Risk Tips:Demand fell more than expected and monetary policy tightened more than expected.