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中国材料-“反内卷” 考察行第 4 天-China Materials-Anti-Involution Trip Day 4
2025-09-06 07:23

Summary of Conference Call Notes Industry Overview - Industry Focus: The conference call primarily focused on the steel industry in Tangshan, China as part of an "anti-involution trip" conducted by Morgan Stanley [1][7]. Key Points and Arguments Demand and Supply Dynamics - Demand Growth: Year-to-date (YTD) steel demand is reported to be growing at low single digits, contrary to the previous industry consensus which anticipated a 1.5% year-over-year decline. However, real domestic demand is likely experiencing small negative growth [2][7]. - Export Strength: There is a notable strength in direct, indirect, and finished goods exports, which is contributing positively to the overall demand despite domestic challenges [2][7]. Production Cuts and Supply Reform - Production Cuts: A production cut order has been issued by Beijing but has not yet been enforced in Tangshan. Some mills believe that due to positive margins, there is no immediate need for cuts, while others anticipate cuts may be necessary in Q4 [3][7]. - Historical Context: The situation is reminiscent of the 2015/16 supply reform when Tangshan mills were initially skeptical about production cuts [3][7]. - Regional Variations: Regions like Shandong, Jiangsu, and Liaoning are actively cutting production due to worse supply-demand conditions, while Tangshan mills are agreeing to control production to maintain positive margins [3][7]. Inventory and Market Conditions - High Inventory Levels: Steel inventory in Tangshan remains high, primarily due to a significant portion being locked in the futures market. This inventory may be released when market prices become favorable [4][7]. Iron Ore Outlook - Positive Iron Ore View: Steel mills express confidence in near-term iron ore prices, projecting a range of US$90-95 per ton for 2026. This optimism is supported by high molten iron production and limited supply from Simandou [5][7]. Aluminum Capacity Expansion - New Aluminum Capacity in Angola: A new aluminum capacity of 120kt is expected to commence operations by the end of 2025, with full ramp-up anticipated in Q1 2026. The power supply contract secured at a lower tariff significantly reduces production costs compared to domestic markets [6][7]. Additional Important Insights - Market Sentiment: The overall sentiment in the steel industry appears cautiously optimistic, with a focus on managing production levels to sustain profitability amidst fluctuating demand and inventory challenges [2][3][4]. - Investment Opportunities: The insights gathered from the call suggest potential investment opportunities in companies that are well-positioned to navigate the current market dynamics, particularly those involved in iron ore and aluminum production [5][6]. This summary encapsulates the critical insights from the conference call, highlighting the current state and outlook of the steel and aluminum industries in China.