China Steel_ Takeaways from call with steel trader - Potential Supply Reform

Summary of the Conference Call on China Steel Industry Industry Overview - The conference call focused on the iron ore and steel market in China, featuring insights from Mr. Niu Wei, Investment Director at Huishi Asset Management [2][4]. Key Takeaways Potential Supply Reform - Mr. Niu anticipates a potential supply reform in the steel industry in the second half of 2025, although specifics regarding the timeline and scale remain uncertain [2][4]. - The reform is expected to be differentiated based on the ranking of steel mills, considering factors such as ESG (Environmental, Social, and Governance) criteria and product mix, unlike the strict production cuts seen in 2021 [2][4]. Steel Production Capacity - Actual steel output has been approximately 10% higher than the designed nameplate capacity over the years, but it is unclear whether the baseline for future reforms will be based on historical output or designed capacity [2][4]. Demand Trends - Demand for steel is showing marginal improvement, indicated by stable rebar inventory levels despite being in a traditionally slack season [4]. - The funding availability rate has improved, but the overall demand increase is too mild to trigger a significant rally in steel prices [4]. Export Outlook for 2025 - Mr. Niu is cautiously optimistic about steel exports in 2025, estimating volumes to remain flat year-over-year at around 100 million tons [5]. - This stability is attributed to the cost competitiveness of Chinese steel mills compared to international players, with near-term exports benefiting from front-loading demand [5]. Raw Material Price Trends - Prices for iron ore and coking coal are expected to remain stable, with a potential slight increase of approximately RMB 50 per ton for coking coal due to sufficient supply from both domestic and international sources [6]. Additional Insights - The preference for steel and cement sectors has been adjusted in light of potential supply-side policies, indicating a strategic shift in investment focus [2][4]. - The call highlighted the importance of monitoring ESG factors as they may influence future production policies and market dynamics [2][4]. This summary encapsulates the critical insights from the conference call regarding the current state and future outlook of the China steel industry, emphasizing potential reforms, demand trends, and raw material pricing.