Core Viewpoint - The steel industry is expected to experience a turning point in 2025, with demand stabilizing and supply-side reductions contributing to recovery after a prolonged period of losses since 2021 [1] Supply Analysis - The expansion cycle of steel production capacity has ended, and the capacity utilization rate remains high, leading to a forecast of reduced steel output in the future. As of January to July 2025, China's crude steel production was 594 million tons, a year-on-year decrease of 3.10% [1] - The steel industry has been in a state of loss since the third quarter of 2022, prompting some production capacity to be reduced or halted. The market is beginning to clear, and a cyclical upward trend is anticipated as supply contracts [1] - If supply-side policies are implemented, the speed of supply contraction may accelerate, leading to a quicker industry recovery [1] Demand Analysis - Domestic demand for steel is primarily influenced by real estate, infrastructure, and manufacturing sectors. The ongoing decline in the real estate sector has significantly reduced its share of steel demand, but the negative impact is expected to diminish [2] - Demand from the infrastructure and manufacturing sectors is projected to grow steadily, while steel exports maintained a relatively fast year-on-year growth in the first seven months [2] - Overall, steel demand is expected to gradually stabilize [2] Price, Cost, and Profitability Analysis - Short-term steel prices are influenced by changes in domestic demand, while long-term prices depend on marginal supply and demand changes [3] - The cost structure of the steel industry is heavily reliant on raw materials, with iron ore and coking coal accounting for approximately 70% of total costs. China's dependence on imported iron ore necessitates close monitoring of international supply and demand [3] - The outlook suggests a loosening of the fundamentals for iron ore and coal, with expectations of declining prices for coking coal and iron ore, which will aid in the recovery of steel industry profits [3]

Group 1 - The steel ETF (515210) rose over 2.2% on July 29, indicating positive market sentiment towards the steel industry [1] - From January to June, the profit of the black metal smelting and rolling industry increased by 13.7 times year-on-year, driven by ongoing supply reduction policies [1] - The Central Financial Committee emphasized the need to "govern low-price disorderly competition and promote the exit of backward production capacity," which is expected to further enhance steel profits [1] Group 2 - The average gross profit of rebar in July reached 213 yuan per ton, more than doubling from the first quarter (82 yuan) and the second quarter (86 yuan) [1] - Current strict implementation of crude steel production cuts and relaxed iron ore supply suggest that there is still room for steel profits to rise [1] - Major steel product prices have shown significant weekly increases, with rebar and hot-rolled coil gross profits reaching 312 yuan/ton and 305 yuan/ton, respectively, indicating ongoing recovery in industry profitability [1] Group 3 - The steel ETF (515210) tracks the CSI Steel Index (930606), which selects listed companies involved in steel production and processing to reflect the overall performance of the steel industry [1] - The CSI Steel Index is characterized by strong cyclicality and a high correlation with the macro economy, serving as an important indicator of the market performance of China's steel industry [1] - Investors without stock accounts can consider the Guotai CSI Steel ETF Connect C (008190) and Guotai CSI Steel ETF Connect A (008189) [1]