Summary of J.P. Morgan's Research on China Steel Industry Industry Overview - Industry: China Steel - Key Findings: Recent data indicates a significant slowdown in steel production, potentially linked to seasonal trends and government policies aimed at reducing overcapacity in the steel sector. Key Points Production Trends - Steel Output Decline: The latest 10-day average crude steel output in China is annualized at 934 million tons (Mt), reflecting a 7% decrease compared to the previous period and a 4% year-over-year (YoY) decline. This is the lowest output for this period since 2018, which recorded 889 Mt [1][10] - Seasonal Factors: The slowdown aligns with typical seasonal patterns observed in late July, as steel production generally decelerates in the third and fourth quarters [2][3] - Anti-Involution Policies: The production decline may also signal the impact of China's anti-involution policies aimed at curbing overcapacity in the steel industry, marking a potential shift in production velocity beyond mere seasonality [2] Export Dynamics - Record Exports: Despite the production slowdown, July steel exports were recorded at 116 Mt, a 1.7% decrease from June but still the highest for July, representing a 26% increase YoY. Year-to-date exports for the first seven months of 2025 are up 11% YoY [3][8] - Future Projections: J.P. Morgan forecasts that China's steel exports will remain robust, averaging around 100 Mt per annum for the remainder of the decade, with current exports tracking at approximately 12% of total crude steel production [3] Price Forecasts - Production Estimates: J.P. Morgan estimates China's steel production for 2025 to be 990 Mt, a 1.5% decrease from 2024's forecast of 1,005 Mt [4] - Iron Ore Prices: Projected iron ore prices are expected to be $95 per ton in Q3 and Q4 of 2025, with a similar forecast for 2026. Recent trends show iron ore prices have increased by 6% over the past month, surpassing $100 per ton [4] Inventory and Margins - Steel Inventory: As of August 1, total steel inventory in China is flat compared to the past three months but down 11% YoY, indicating the lowest levels for this time of year in over five years [19] - Mill Margins: Steel mill margins in China have strengthened since July, reaching their highest levels since October 2024 [22] Additional Insights - Sector Impact: The anti-involution policies are expected to affect various sectors, including Metals & Mining, Chemicals, Automotives, and Capital Goods, indicating broader implications for the economy [2] - Equity Recommendations: J.P. Morgan has highlighted Rio Tinto as a key equity exposure in the European Metals & Mining sector, with a fair value estimate of £55 per share, potentially rising to £65-75 per share at current commodity prices [4] This comprehensive analysis provides insights into the current state and future outlook of the China steel industry, highlighting production trends, export dynamics, pricing forecasts, and the impact of government policies.
中国钢铁 - 渠道调研 - 生产大幅放缓 - 是季节性因素还是反内卷政策的首个信号；7 月出口创月度历史新China Steel - Channel checker_ Production slows sharply - seasonality or first signal of anti-involution policy_ Exports at highest on record for month of July