Investment Rating - The industry investment rating is Neutral, maintained [9] Core Views - The report highlights that during the negative cycle of the black industrial chain, steel prices are more indicative of market expectations for future profitability than immediate profits. A rebound in steel prices is necessary to break the negative cycle and reverse the industry's loss expectations [2][6][7] - The report notes that recent trends show a synchronized decline in steel prices and steel stocks, driven by weak terminal demand and falling raw material prices, which have weakened cost support for finished products [4][6] - The report emphasizes that while immediate profits may still be present, they are insufficient to stabilize equity prices. Only a rebound in steel prices can alter the industry's outlook [7] Summary by Sections Market Performance - Recent data indicates a slight increase in apparent steel consumption, with a year-on-year increase of 0.06% and a week-on-week increase of 0.53%. However, expectations for demand are weakening as the industry enters a seasonal downturn [4] - The average daily pig iron output from sample steel companies has decreased to 2.4191 million tons, reflecting a downward trend [5] - Inventory levels continue to decline, with total inventory of long products down 27.92% year-on-year and plate inventory down 16.62% year-on-year [5] Historical Context - The report draws parallels to historical instances of synchronized declines in steel and raw material prices, particularly from 2012 to 2014, where weak demand and oversupply led to significant price drops [6][7] - It notes that the current situation mirrors past cycles, with the potential for further declines in steel prices if the negative cycle continues [6][7] Investment Opportunities - The report suggests focusing on undervalued quality companies in the steel sector, such as Baosteel and Nanjing Steel, which are expected to enhance shareholder returns. It also highlights the potential for mergers and acquisitions in the sector [28] - In the new materials sector, companies like Fushun Special Steel and Huafeng Aluminum are identified as having strong recovery potential [28]