Core Viewpoint - The steel industry is expected to gradually recover as demand stabilizes and supply-side adjustments begin to take effect, with potential acceleration if supply policies are implemented [1][3]. Demand and Supply Analysis - Demand is showing a marginal increase with a week-on-week rise in apparent consumption of five major steel products to 8.7406 million tons, up by 237,300 tons. Inventory levels have decreased to 15.1061 million tons, down by 91,300 tons [1]. - The operating rate of blast furnaces among 247 steel mills is at 84.45%, an increase of 0.47 percentage points week-on-week, while electric furnace operating rates have decreased to 60.26%, down by 1.28 percentage points [1]. - The industry has been experiencing losses since Q3 2022, with nearly 40% of steel companies still in the red. However, market-driven supply adjustments are beginning to emerge [3]. Profitability Trends - The average gross profit per ton for rebar has decreased to 216.2 CNY, down by 18.1 CNY, while hot-rolled coil profit has increased to 172.2 CNY, up by 18.4 CNY. The overall profitability rate for 247 steel companies is at 58.01%, a decline of 0.86% [2]. - Expectations indicate that iron ore production will accelerate, leading to a more relaxed market for iron ore prices, which may alleviate cost pressures for the steel industry [2]. Future Outlook - The demand from the real estate sector is expected to weaken, but demand from infrastructure and manufacturing is anticipated to grow steadily. Steel exports have maintained year-on-year growth through August [3]. - The recently released "Steel Industry Stability Growth Work Plan (2025-2026)" emphasizes continued production cuts and the exit of inefficient capacities, supporting the expectation of supply-side contraction [3]. - The long-term trend in the steel industry is towards increased concentration and high-quality development, benefiting companies with product structure and cost advantages [3].

Group 1 - The core viewpoint is that steel demand is expected to stabilize while supply is anticipated to continue contracting, with infrastructure and manufacturing sectors showing steady growth in steel demand [1] - From January to July, steel exports maintained a year-on-year growth, indicating a positive trend in overall steel demand [1] - The steel industry has been experiencing losses since Q3 2022, leading to a market-driven supply adjustment, which is expected to continue [1] Group 2 - The recently released "Steel Industry Stabilization Growth Work Plan (2025-2026)" emphasizes the continuation of production reduction policies, aiming to support advanced enterprises and phase out inefficient capacities, thereby promoting a dynamic balance between supply and demand [1] - The fundamental outlook for the steel industry is expected to gradually improve as supply-side contraction is maintained [1] - Investors interested in the steel sector can consider the only ETF tracking the steel industry (515210) for exposure to steel plates, special steel, and metal products [1]

Group 1 - The steel industry demand is expected to gradually bottom out, with signs of market clearing on the supply side, leading to a potential recovery in the industry's fundamentals [1][3] - Last week, the apparent consumption of five major steel products was 8.5777 million tons, an increase of 47,800 tons week-on-week, while total inventory reached 14.6788 million tons, up 268,400 tons [1] - The operating rate of blast furnaces among 247 steel mills was 83.2%, a decrease of 0.16 percentage points week-on-week, indicating a slight reduction in production activity [1][2] Group 2 - The average gross profit for rebar was 231.5 CNY/ton, down 12.2 CNY/ton week-on-week, reflecting a decline in profitability across the sector [2] - The steel industry has been experiencing losses since Q3 2022, with over 30% of steel companies still in the red, but market-driven supply adjustments are beginning to take effect [3] - The Ministry of Industry and Information Technology is expected to introduce policies aimed at structural adjustments and the elimination of outdated production capacity, which could accelerate supply contraction [3] Group 3 - Long-term trends indicate an increase in industry concentration and a shift towards high-quality development, benefiting companies with product and cost advantages [4] - Recommended companies include Baosteel, Hualing Steel, and Shougang, which are noted for their technological and product structure leadership [4] - The report highlights the potential for upstream resource companies to benefit from demand recovery, recommending firms such as Hebei Resources and Erdos [4]

Investment Rating - The report maintains an "Overweight" rating for the steel industry [5]. Core Viewpoints - Demand is expected to gradually bottom out, and the supply side is beginning to show signs of market-driven clearance, indicating a potential recovery in the steel industry's fundamentals [3][4]. - The report anticipates that if supply policies are implemented, the speed of supply contraction will accelerate, leading to a quicker upward trend in the industry [3]. Summary by Sections Steel Market Overview - The apparent consumption of five major steel products reached 8.5299 million tons, an increase of 2.64% week-on-week [24]. - The total steel inventory was 14.4104 million tons, with a week-on-week increase of 2.25% [11]. - The operating rate of blast furnaces in 247 steel mills was 83.36%, a decrease of 0.23 percentage points week-on-week [28]. Production and Profitability - The total steel production was 8.7806 million tons, an increase of 0.73% week-on-week [30]. - The average gross profit for rebar was 243.7 CNY/ton, down 13.4% week-on-week, while hot-rolled coil gross profit was 201.7 CNY/ton, down 13.5% week-on-week [35]. Demand and Supply Dynamics - The report notes a decline in real estate demand, but infrastructure and manufacturing sectors are expected to maintain stable growth [3]. - Steel exports from China maintained a year-on-year growth of 9.2% in the first half of the year [3]. Raw Material Prices - Iron ore prices decreased, with the spot price dropping to 765 CNY/ton, a decline of 1.54% [42]. - Coking coal prices remained stable at 1430 CNY/ton, while coking prices increased to 1660 CNY/ton, a rise of 3.11% [42]. Recommendations - The report recommends focusing on leading companies with technological and product structure advantages, such as Baosteel and Hesteel, as well as companies with low valuations and high dividends like CITIC Special Steel [3].

Investment Rating - The industry investment rating is Neutral, maintained [9] Core Insights - The report highlights three positive signals for the steel industry: 1) Steel prices and inventory have dropped to low levels, leading to a market sentiment of "hope for price increases"; 2) Expectations of production cuts are strengthening, which is driving profits in the futures market and supporting steel stock prices; 3) Improved expectations in the real estate sector may benefit the entire industry chain [2][6][12] Summary by Sections Market Trends - Since April, steel prices and stocks have been in a downward trend due to trade shocks. However, recent easing of trade conflicts has led to a rebound in steel stocks [2][6] - The apparent consumption of steel has decreased by 2.82% week-on-week and 4.02% year-on-year, indicating a seasonal decline in demand [4] Production and Inventory - Daily average pig iron production has risen to 2.4435 million tons, an increase of 4.23 thousand tons per day compared to the previous week [5] - National total inventory has decreased by 3.25% week-on-week, with long product inventory down 4.73% year-on-year [5] Price Movements - Shanghai rebar prices have increased to 3,200 CNY per ton, up 70 CNY from the previous week, while hot-rolled prices have risen to 3,230 CNY per ton, up 20 CNY [5] - The report notes that the market sentiment is shifting towards optimism as steel prices stabilize and inventory levels decrease [12] Investment Opportunities - The report suggests focusing on undervalued quality companies in the steel sector, such as Baosteel and Nanjing Steel, as well as companies with strong performance potential like Hualing Steel and New Steel [27]