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Investment Rating - The report indicates a positive outlook for the steel and cement sectors in China, suggesting potential benefits from a more supportive policy environment on supply discipline [1][12][13]. Core Insights - There is a renewed policy focus on addressing supply discipline in China, with a call for a unified national market and a crackdown on excessive competition leading to lower prices [1]. - The report highlights that excess capacity in various industries ranges from 30% to 50%, with specific figures for steel and cement being around 30% to 50% [2][11]. - The potential for executing production cuts in the steel sector is noted, with a target of 50 million tons, which could lead to a significant reduction in crude steel output in the second half of 2025 [13][18]. - The cement sector is also undergoing capacity categorization and is targeting a reduction of unauthorized and energy-intensive capacities, which could improve capacity utilization from 50% to 70% [13][14]. Summary by Sections Supply Side Expectations - The report discusses ongoing policy efforts to discourage overly fierce competition and control output in sectors like hog farming and steel, aiming to reverse price deflation trends [12]. - The clarity of future policy guidance remains uncertain, but discussions suggest a more supportive context for executing supply plans in the steel and cement sectors [13]. Excess Capacity Analysis - Excess capacity is a persistent challenge, with estimates indicating that unauthorized excess clinker capacity in the cement industry exceeds 400 million tons, representing nearly 18% of the industry [14][15]. - The report estimates that additional requirements could lead to a targeted exit of 277 to 377 million tons of clinker capacity, further reducing excess capacity [13]. Market Impact - The report anticipates that the execution of steel production cuts could create a meaningful deficit in the market, similar to conditions observed in the second half of 2021, which previously led to margin expansion and reduced exports [18][19]. - The implied spread from rebar futures suggests a potential margin expansion of nearly RMB 200 per ton in the steel sector, indicating a strong possibility of production cuts [16].

ab Global Research 3 July 2025 China Economic Comment Data Preview: Robust Q2 Growth, More Headwinds Ahead High frequency: better PMIs, weaker home sales, cooler port activities NBS manufacturing PMI edged up by 0.2ppt to 49.7 and Caixin PMI jumped by 2.1ppt to 50.4 in June, with both new orders and production index improving. NBS non- manufacturing PMI edged up by 0.2ppt to 50.5 in June with slightly softer service PMI but stronger construction PMI. 30-city property sales declined further to -10% YoY in Ju ...

Core Viewpoint - ArcelorMittal S.A. (MT) shares have increased approximately 39.1% over the past three months, indicating strong momentum and positive prospects for investors to consider adding the stock to their portfolios [1] Group 1: Stock Performance - MT has outperformed its industry over the past year, with shares rising 41.9% compared to a 23.6% decline in the industry [2][8] - The company’s stock has shown a significant rally of 39.1% in the last three months, reflecting strong investor confidence [1] Group 2: Earnings Growth - The Zacks Consensus Estimate for ArcelorMittal's earnings for 2025 is projected at $4.23 per share, suggesting a year-over-year growth of 43.4% [3][8] - MT reported earnings of $1.16 per share for the first quarter of 2025, surpassing the Zacks Consensus Estimate of 71 cents [4] Group 3: Strategic Expansion - ArcelorMittal is enhancing its steel production capacity with a focus on higher-value offerings, particularly in the automotive steel sector by introducing advanced high-strength steels (AHSS) [5] - The company plans to build a fully owned non-grain-oriented electrical steel (NOES) plant in Alabama to meet the growing demand for premium electrical steel and to provide a reliable domestic supply [9] Group 4: Shareholder Value - ArcelorMittal is committed to enhancing shareholder value through share repurchase initiatives and has increased its base dividend by 10% to 55 cents per share [10] - The company plans to distribute at least 50% of its post-dividend free cash flow to shareholders via ongoing share buybacks, reinforcing its commitment to returning value [11]

Trade Policy - Vietnam initiated an anti-dumping duty on Chinese hot-rolled steel, with the document surfacing in February and an expected effective date of March 7 for 120 days [1] Import Data - Vietnam imported approximately 8800 thousand tons of hot-rolled steel from January to September of the previous year [1] - 72% of Vietnam's hot-rolled steel imports during that period originated from China [1]

越南贸易部对中国热轧钢征收反倾销关税，税率从23.10%到27.83%不等。反倾销关税自2025年7月6日起生效，有效期5年。 ...

Core Viewpoint - Cleveland-Cliffs stands to benefit significantly from President Trump's recent steel tariff increase, which has led to a notable rise in its stock price, despite the company's recent financial struggles [1][4]. Group 1: Tariff Impact - President Trump reinstated a 25% tariff on all foreign steel on February 10, 2024, and subsequently doubled it to 50% effective June 4, 2024 [2][4]. - The new tariff regime includes strict reporting requirements for foreign importers, with severe penalties for non-compliance, which is expected to favor American steel producers like Cleveland-Cliffs [4]. - The aggressive tariff strategy aims to bolster American manufacturing, positioning Cleveland-Cliffs as a key beneficiary due to its status as the largest producer of flat-rolled steel in the U.S. [4]. Group 2: Financial Performance - Cleveland-Cliffs has experienced declining annual revenue over the past two years, reporting a net loss of $754 million on nearly $19.2 billion in revenue for 2024 [5]. - The company has been unprofitable in four of its last five quarters, indicating ongoing financial challenges despite the favorable tariff environment [5]. Group 3: Market Sentiment and Risks - Investor enthusiasm for Cleveland-Cliffs has surged, with the stock trading over 30% higher following the tariff announcement, reflecting confidence in the company's potential to capitalize on the new tariffs [1]. - However, there are concerns regarding the sustainability of the 50% tariff, as negotiations with countries like Mexico could lead to exemptions that would diminish Cleveland-Cliffs' competitive advantage [6][8]. - The potential for tariff reductions in future negotiations raises uncertainty about the long-term benefits for Cleveland-Cliffs and the broader American steel industry [7][8].

Investment Rating - The report maintains a cautious stance on steel equities, suggesting to wait for further concrete policies before investing [5]. Core Insights - The report discusses the recent government initiatives aimed at curbing excess competition and reducing capacity in the steel sector, highlighting a historical context of similar measures that have led to short-term price increases followed by declines [5]. - Investors are currently pricing in a potential "supply-side reform 2.0," but the report emphasizes the lack of concrete policies such as mandatory production cuts and consolidation of unprofitable mills, which are necessary for a more bullish outlook [5]. Summary by Sections Historical Policy Announcements - The report includes a table detailing historical policy announcements related to phasing out outdated capacities, showing various impacts on steel prices over different time frames [3]. - For instance, a symposium in January 2016 led to a 1.2% drop in rebar prices the following day, while subsequent announcements in February and April 2016 saw price increases of 1.0% and 0.3%, respectively [3]. Market Performance - Steel shares experienced significant fluctuations, with increases of 5% to 91% noted on July 2, attributed to government meetings and production cut notices in Tangshan [5]. - The report indicates that historical reactions to similar government announcements typically resulted in a 2% increase in share prices the following day, but declines of 2-5% after a month [5]. Global Steel Comparisons - A comparative analysis of global steel companies is provided, showcasing market capitalization, enterprise value, and performance metrics such as EV/EBITDA and PE ratios [7]. - For example, Baosteel has a market cap of $21.1 billion and an EV/EBITDA ratio of 6.0, while U.S. Steel Corp has a market cap of $12.4 billion with a PE ratio of 26.2 [7].

Market Overview - Wall Street ended the first day of July 2025 on a mixed note, with the S&P 500 and Nasdaq falling while the Dow Jones Industrial Average gained slightly [1] - The contrasting movements in the major stock indices were influenced by opposing forces, including a feud between President Trump and Tesla CEO Elon Musk, and the U.S. Senate's passage of Trump's tax bill aimed at stimulating economic growth [2] Investment Opportunities - Amid market uncertainty, there is a potential opportunity to invest in low-leverage stocks that are not expensive and can provide a protective shield during turbulent times [3] - Suggested low-leverage stocks include Novartis (NVS), Alamo Group (ALG), ArcelorMittal (MT), Bilibili (BILI), and Sterling Infrastructure, Inc. (STRL) [3][10] Low-Leverage Stocks - Low-leverage stocks are characterized by a lower debt-to-equity ratio, indicating reduced financial risk and improved solvency [7][8] - Investing in low-leverage stocks is recommended to avoid significant losses during economic downturns [6][7] Company Highlights - **Novartis (NVS)**: Recently completed the acquisition of Regulus Therapeutics, enhancing its drug portfolio. The Zacks Consensus Estimate for NVS's 2025 sales suggests a 7.3% improvement from 2024, with a long-term earnings growth rate of 7.9% [15][16] - **Alamo Group (ALG)**: Completed the acquisition of Ring-O-Matic, expanding its product offerings. The Zacks Consensus Estimate for ALG's 2025 earnings indicates a 7.2% year-over-year improvement [17][18] - **ArcelorMittal (MT)**: Signed an agreement to sell operations in Bosnia and Herzegovina, allowing a focus on higher-growth areas. The company has a long-term earnings growth rate of 49.8% [19] - **Bilibili (BILI)**: Reported a 24% year-over-year revenue increase and a 58% improvement in gross profit for Q1 2025. The Zacks Consensus Estimate for its 2025 sales indicates a 12.1% improvement from 2024 [20][21] - **Sterling Infrastructure (STRL)**: Announced the acquisition of CEC Facilities Group, enhancing its service portfolio in high-growth markets. The company has a long-term earnings growth rate of 15% [22][23]

Business Overview - Insteel Industries is the largest U S manufacturer of steel wire reinforcing products for concrete construction applications[5] - Nonresidential construction accounts for 85% of sales, while residential construction accounts for 15%[7] - Concrete product manufacturers represent 70% of sales, with distributors, rebar fabricators, and contractors making up the remaining 30%[8] Financial Performance - Net sales reached $5906 million in 2021[27] - EBITDA for 2021 was $1057 million, with an EBITDA margin of 179%[33, 35] - As of October 2, 2021, Insteel had $899 million in cash and no outstanding borrowings on its $1000 million revolving credit facility[48] Growth Strategy - Continued conversion of rebar users to Engineered Structural Mesh (ESM) represents a substantial growth opportunity[23] - The company has made strategic acquisitions, including Ivy Steel & Wire for $503 million and American Spring Wire for $335 million[25] - Capital expenditures are expected to total up to $250 million in fiscal year 2022[45] Market Outlook - Public construction spending for August YTD 2021 was down 40% from the prior year but up 65% from the four-year prior average[55] - Private nonresidential construction for May YTD was down 91% from the prior year and down 36% from the four-year prior average[55] - Private residential construction for May YTD was up 238% from the prior year and up 247% from the four-year prior average[55]