GTHT released a research report stating that as the seasonal transition from off-peak to peak season gradually unfolds, steel demand is expected to marginally recover, while inventory is anticipated to gradually enter a destocking phase. On the supply side, even without considering supply policies, the industry has been experiencing losses for an extended period, and market-driven supply clearance has already begun to emerge. The steel industry's fundamentals are expected to gradually recover. From a long-term perspective, industrial concentration enhancement and promoting high-quality development are inevitable trends for the future steel industry development. Steel companies with product structure and cost advantages will fully benefit. Under the backdrop of stricter environmental protection, ultra-low emission transformation, and carbon neutrality, leading companies' competitive advantages and profitability will become more prominent. GTHT maintains an "overweight" rating for the steel industry.
GTHT's main viewpoints are as follows:
Demand declined sequentially, inventory rose sequentially. Last week (referring to the week from September 1 to September 5, 2025), apparent consumption of five major steel product categories totaled 8.2783 million tons, down 299,400 tons sequentially. Among these, construction materials apparent consumption was 2.8484 million tons, down 51,700 tons sequentially; plate materials apparent consumption was 5.4299 million tons, down 247,700 tons sequentially. Production of five major steel product categories was 8.6065 million tons, down 239,600 tons sequentially; total inventory was 15.007 million tons, up 328,200 tons sequentially, maintaining low levels. Last week, blast furnace operating rate of 247 steel mills was 80.4%, down 2.8 percentage points sequentially; blast furnace capacity utilization rate was 85.79%, down 4.23 percentage points sequentially; electric arc furnace operating rate was 62.18%, down 0.64 percentage points sequentially; electric arc furnace capacity utilization rate was 53.62%, down 0.33 percentage points sequentially. As the seasonal transition gradually unfolds, steel demand is expected to marginally recover, while inventory is anticipated to gradually enter a destocking phase.
Profitability declined sequentially. Last week, imported iron ore inventory at 45 ports was 137.63 million tons, down 821,800 tons sequentially. Last week, simulated average gross profit for rebar was 179.4 yuan per ton, down 52 yuan per ton sequentially; simulated average gross profit for hot-rolled coil was 135.4 yuan per ton, down 36 yuan per ton sequentially; profitability rate of 247 steel enterprises was 61.04%, down 2.6% sequentially. Looking ahead, the firm expects iron ore to accelerate production while demand is unlikely to see significant improvement. Iron ore may gradually enter a loose cycle, with limited upward elasticity in iron ore prices. Cost constraints for steel may gradually improve, and industry profit levels are expected to gradually recover.
Demand expected to stabilize, supply maintains contraction expectations. Real estate continues declining, leading to a decrease in real estate demand share. The negative drag from real estate on steel demand is expected to weaken; steel demand from infrastructure and manufacturing sectors is expected to grow steadily. Regarding exports, steel exports from January to July still maintained year-over-year growth. Overall, steel demand is expected to gradually stabilize. On the supply side, the industry has been experiencing losses since Q3 2022, with nearly 40% of steel enterprises still losing money, and market-driven supply clearance has begun to emerge. From a policy perspective, the recently released "Steel Industry Stable Growth Work Plan (2025-2026)" proposes to "continue implementing production reduction policies, implement annual production control tasks according to the principle of supporting advanced enterprise development and forcing out backward and inefficient capacity, promoting dynamic supply-demand balance." The firm maintains expectations of supply-side contraction, and steel industry fundamentals are expected to gradually recover.
Maintains "overweight" rating. From a long-term perspective, industrial concentration enhancement and promoting high-quality development are inevitable trends for future steel industry development. Steel companies with product structure and cost advantages will fully benefit. Under the backdrop of stricter environmental protection, ultra-low emission transformation, and carbon neutrality, leading companies' competitive advantages and profitability will become more prominent.
Key recommendations: 1) Baosteel Co., Ltd. with leading technology and product structure, Valin Steel Co., Ltd. and Shougang Co., Ltd. with continuous product structure upgrades, low-cost and flexible steel enterprises Fangda Special Steel Co., Ltd. and Xinyu Iron & Steel Co., Ltd.; 2) Low-valuation, high-dividend specialty steel leaders with competitive advantages CITIC Special Steel Group Co., Ltd. and Yongxing Special Stainless Steel Co., Ltd.; high-barrier material companies Jiuli Hi-tech Metals Co., Ltd., Shanglou New Materials Co., Ltd., and Hb New Material Technology Co., Ltd.; superalloy leaders Tunan Co., Ltd. and Fushun Special Steel Co., Ltd.; 3) Under the demand recovery trend, optimistic about upstream resource products with long-term structural advantages, recommending HBIS Resources Co., Ltd., Dazhong Mining Co., Ltd., Anning Co., Ltd., Ordos Co., Ltd., Yongxing Special Materials Technology Co., Ltd., and Inner Mongolia Baotou Steel Union Co., Ltd.
Risk warnings: Supply-side contraction falling short of expectations, significant demand decline.