Zhi Tong Cai Jing·2025-11-11 02:25Core Viewpoint - The steel industry is facing challenges with profitability due to ineffective policies on crude steel volume control, and preventing internal competition while improving prices remains a key task for the upcoming year [1][3]. Pricing - Steel prices have been on a downward trend, with future movements dependent on production cuts. The core issues include supply-demand mismatches, weakened cost support, and delayed policy effects. The market is currently in a weak balance state characterized by low inventory, low prices, low demand, and high supply elasticity. The future price trajectory will hinge on the effectiveness of production cut policies [2][3]. Supply - The government is continuing to implement crude steel production controls and promote "dual control of carbon emissions." Policies are focused on preventing new steel production capacity under various guises and promoting high-performance special steel and recycling. The effectiveness of these policies has diminished compared to 2021, leading to increased internal competition and deteriorating profitability [3][4]. Demand - The proportion of steel used in manufacturing has been increasing, surpassing 50%. Traditional manufacturing is stable, while high-end manufacturing and emerging industries are growing rapidly. However, real estate sales have not shown significant recovery, and it is expected that steel consumption in the real estate sector will decline. Overall, domestic steel consumption is projected to decrease by 1.9% in 2026 [4][5]. Costs - The supply of iron ore is expected to increase, which may improve profitability per ton of steel. The global iron ore market is anticipated to be oversupplied in 2026, with a forecasted equilibrium price of $90 per ton (CFR China), down approximately 12% from 2025, leading to an estimated profit improvement of about 130 yuan per ton of steel [5][6]. Profitability - Profit recovery in the steel industry is contingent upon strict enforcement of production cuts. If production is reduced by 4 million tons, the annual crude steel output would be 945 million tons, potentially restoring gross profit margins to around 300 yuan. Conversely, if production is cut by only 2.5 million tons, the output would be 960 million tons, with profit margins likely remaining at this year's average of 0-100 yuan [6][7].