Core Viewpoint - The steel sector is at a turning point characterized by low expectations, a bottoming out of fundamentals, and upcoming catalysts, with the only steel ETF (515210) rising over 2% [1] Supply Side: "Anti-Competition" Policy Implementation and Capacity Management Acceleration - The "anti-competition" policy in the steel industry is becoming actionable, with clearer requirements for supply control in the new growth stabilization plan [2] - Environmental inspections are ongoing, leading to accelerated exit of non-compliant capacities, which is expected to enhance industry concentration [2] - The market share of the eight major construction state-owned enterprises has increased from 41% at the end of 2022 to 51% by the end of 2025, indicating a trend towards resource concentration among leading firms [2] Cost Side: Iron Ore Supply Easing and Profit Transfer to Downstream - The long-standing issue of the steel industry being constrained by upstream iron ore is changing, with new large mines coming online [3] - Current port iron ore inventory has reached 169 million tons, nearing historical highs, indicating a loosening supply [3] - The profit distribution within the steel industry is shifting, with iron ore profits expected to decrease, allowing for improved profitability in the finished steel segment [3] Inventory and Price: Low Inventory and Price Stabilization Establishing an Upward Foundation - This year's winter storage efforts are weaker than in previous years, resulting in total inventory at near historical lows, which reduces post-holiday destocking pressure [4] - Steel prices have stabilized at around 3200 yuan/ton, indicating a bottoming out, and any demand or supply-side catalysts could lead to significant price increases [4] - The upcoming demand peak in March, following the late Lunar New Year, is expected to boost trade sentiment and increase the likelihood of a strong market opening [4] Demand Side: Internal and External Demand Expected to Create Synergy - External demand remains resilient due to manufacturing expansions in Southeast Asia and continued loose policies in Europe and the U.S. [5][6] - Domestic demand is anticipated to stabilize as the real estate sector shows signs of recovery after a prolonged downturn [6] - New emerging sectors, such as oil and gas and nuclear power, are expected to contribute to incremental demand for steel products [6] Investment Opportunity: Steel ETF (515210) as a Strategic Tool - The steel ETF (515210) provides a diversified investment approach to capture the sector's recovery potential amid "anti-competition" and cost reduction dynamics [7] - The current absolute valuation of the steel sector has improved from undervaluation to a moderately low position, indicating potential for absolute returns [7] - The ETF tracks leading companies with stable profit characteristics, making it a core investment choice for capturing both short-term trading opportunities and long-term value in the steel sector [7]