Shenwan Hongyuan Securities·2025-11-18 12:27Group 1 - The steel industry is expected to see improved profitability due to three main factors: declining raw material prices, supply-side adjustments, and resilient demand from manufacturing [3][5][9] - The West Simandou iron ore project is set to commence production in November 2025, significantly increasing iron ore supply and contributing to a downward trend in iron ore prices [3][71] - Government policies aimed at reducing overcapacity and promoting energy efficiency are expected to accelerate the exit of outdated production capacity, leading to a more optimized supply structure in the steel industry [3][16][10] Group 2 - Demand for steel is projected to stabilize in the construction sector, while manufacturing demand remains resilient, particularly for flat steel and special steel products [3][19][25] - The overall steel demand in China is forecasted to decline slightly, with total demand expected to be 9.05 billion tons in 2025, a decrease of 0.11% from 2024 [19][20] - The construction sector's share of steel demand is decreasing, while the manufacturing sector's share is increasing, indicating a shift in consumption patterns [3][19] Group 3 - The report highlights that the profitability of steel companies is recovering, with a stronger performance expected in flat steel compared to long steel products [3][85][82] - The average profit margin for steel companies is projected to improve as cost pressures ease, with a focus on companies with stable demand and low valuations [3][87][90] - Investment recommendations include focusing on companies like Baosteel, Nanjing Steel, and Hualing Steel, which are expected to benefit from the shift towards manufacturing [3][95][94]