Core Viewpoint - The steel market is experiencing weak demand and supply, leading to a bottoming out of steel prices with weak fluctuations [1][2][3] Supply and Demand Analysis - Demand has weakened significantly entering June, with steel mills reducing production intensity through increased maintenance, resulting in a decline in pig iron and finished steel output [1] - As of June 13, the prices for five major steel products were reported at 3208 CNY/ton for rebar, 3544 CNY/ton for wire rod, 3198 CNY/ton for hot-rolled, 3623 CNY/ton for cold-rolled, and 3421 CNY/ton for medium plate, showing week-on-week changes of -0.33%, -0.40%, -0.80%, -0.64%, and -0.87% respectively [1] - Total steel production last week was 8.5885 million tons, a decrease of 215,300 tons week-on-week [1] Inventory and Consumption - Total steel inventory was 13.5456 million tons, down by 92,500 tons week-on-week, with social inventory decreasing by 35,300 tons to 9.2748 million tons and steel mill inventory down by 57,200 tons to 4.2708 million tons [2] - The apparent consumption of the five major steel products last week was 8.681 million tons, a decrease of 140,700 tons week-on-week [2] Cost and Profitability - The average pig iron cost for 114 steel mills was reported at 2321 CNY/ton, down by 41 CNY/ton week-on-week [2] - As of June 13, the gross profit per ton for high furnace rebar, hot-rolled coil, and cold-rolled coil was +135 CNY/ton, +60 CNY/ton, and -65 CNY/ton respectively, with week-on-week changes of +36 CNY/ton, +27 CNY/ton, and -3 CNY/ton [2] - 58.44% of sampled steel companies were profitable last week, a decrease of 0.43 percentage points week-on-week [2] Market Outlook - The current decline in raw material prices has provided some cost relief for steel mills, supporting profit recovery, although demand remains weak [3] - If crude steel regulation is effectively implemented, supply may decrease, potentially improving the supply-demand relationship and supporting steel prices [3] Investment Recommendations - The steel sector is currently undervalued, with some quality steel companies trading at low price-to-book (PB) ratios compared to 2022 levels [4] - The industry is in a profit recovery phase, with potential for further improvement if industry conflicts are resolved [4] - Recommended stocks include: Hualing Steel (000932), Shougang Co. (000959), Sangang Minmetals (002110), Xinsteel Co. (600782), and Xinxing Ductile Iron Pipes (000778) for low PB; and Zhongnan Co. (000717) and Bayi Steel (600581) for regional advantages [4]