According to the Zhitong Finance APP, CITIC Construction Investment has released a research report stating that with the continuous release of policies aimed at reducing supply in the steel industry this year, industry profits have significantly improved. Entering July, the Central Financial Committee meeting emphasized &#34;governing enterprises' low-price disorderly competition in accordance with the law and regulations, guiding enterprises to improve product quality, and promoting the orderly exit of backward production capacity,&#34; further enhancing steel profits. Taking rebar as an example, the estimated average gross profit per ton in July reached 213 yuan, more than doubling compared to the first quarter (82 yuan) and the second quarter (86 yuan). Looking ahead, as the execution of crude steel production cuts becomes increasingly strict and the supply of iron ore on the raw material side remains loose, there is still room for steel profits to rise, and the historically weak position of steel companies in the upstream and downstream is expected to be reversed.
<h2>The main points of CITIC Construction Investment are as follows:</h2>
Profit recovery in the industry under anti-involution
According to data from the National Bureau of Statistics, from January to June, the total profit of industrial enterprises above designated size nationwide reached 34,365.0 billion yuan, a year-on-year decrease of 1.8%. In June, profits fell by 4.3% year-on-year, but the decline narrowed compared to May (-9.1%). Among them, the mining industry achieved a total profit of 4,294.1 billion yuan, a year-on-year decrease of 30.3%; the manufacturing industry achieved a total profit of 25,900.6 billion yuan, an increase of 4.5%; and the electricity, heat, gas, and water production and supply industry achieved a total profit of 4,170.4 billion yuan, an increase of 3.3%. By industry, the profit of black metal smelting and rolling processing increased by 13.7 times year-on-year, and the profit of non-ferrous metal smelting and rolling processing increased by 7.8%. With the continuous release of policies aimed at reducing supply in the steel industry this year, industry profits have also significantly improved.
Entering July, the Central Financial Committee meeting emphasized &#34;governing enterprises' low-price disorderly competition in accordance with the law and regulations, guiding enterprises to improve product quality, and promoting the orderly exit of backward production capacity,&#34; further enhancing steel profits. Taking rebar as an example, the estimated average gross profit per ton in July reached 213 yuan, more than doubling compared to the first quarter (82 yuan) and the second quarter (86 yuan). Looking ahead, as the execution of crude steel production cuts becomes increasingly strict and the supply of iron ore on the raw material side remains loose, there is still room for steel profits to rise, and the historically weak position of steel companies in the upstream and downstream is expected to be reversed.
The increase in finished product prices is significantly higher than that of raw materials, leading to a substantial increase in steel profits
In terms of supply, last Friday, the supply of five major steel products was 8.6697 million tons, a week-on-week decrease of 12,200 tons, a decline of 0.1%. The current steel production has decreased, with a more significant decline in hot-rolled and wire rod production. In terms of inventory, last Friday, the total inventory of five major steel products was 13.365 million tons, a week-on-week decrease of 11,600 tons, marking the fourth consecutive week of slight decline. Social inventory increased, and steel mill inventory reached the lowest level since the Spring Festival. The inventory changes of construction materials and plates showed some differentiation, with construction materials maintaining a reduction and plates continuing to accumulate.
In terms of consumption, last Friday, the weekly consumption of the five major products was 8.6813 million tons, with construction materials consumption increasing by 2.7% week-on-week and plate consumption decreasing by 1.7%. There was also some differentiation in consumption between construction materials and plates. As of July 25, the prices of rebar, hot-rolled, medium-thick plates, and cold-rolled increased by 180 yuan/ton, 160 yuan/ton, 110 yuan/ton, and 170 yuan/ton, respectively, compared to the previous week. Due to the significant increase in finished product prices compared to raw materials last week, the main steel profits have increased substantially. The spot gross profits for rebar, hot-rolled, medium-thick plates, and cold-rolled were 312 yuan/ton, 305 yuan/ton, 33 yuan/ton, and 109 yuan/ton, respectively, an increase of 105 yuan/ton compared to the previous week
+88 CNY/ton, +44 CNY/ton, +97 CNY/ton. 247 steel mills have a profit margin of 63.64%, up 3.47 percentage points month-on-month.
Investment Recommendations for General Steel
Since general steel products are mainly used in the construction industry, and the current recovery time for real estate is still unclear, it is advisable to prioritize high dividend, high payout, and leading enterprises in various downstream sectors when allocating assets. Recommended stocks to pay attention to include: Valin Steel (000932.SZ), Baosteel (600019.SH), etc. In the long term, continue to monitor the transmission of improvements in real estate sales to construction starts.
Investment Recommendations for Special Steel and New Materials
The special steel sector is strongly supported by policies. In China, there is &#34;import substitution&#34; in the mid-to-high-end special steel new materials, and &#34;global market share enhancement&#34; externally. Currently, the proportion of mid-to-high-end special steel in China is about 4%, which is still significantly lower than that of developed countries like Japan and Europe and the United States. With the rapid development of China's mid-to-high-end manufacturing industry, the demand for mid-to-high-end special steel is expected to grow rapidly, and the valuations of mid-to-high-end special steel companies are likely to increase. Looking at the valuations of special steel companies in developed countries, they are mostly at levels of 15-25 times. The rapid development phase of special steel in Japan and Europe and the United States has passed, while China's mid-to-high-end special steel is still in the growth phase. The industries applying it, such as new energy, shipbuilding, and aerospace, are in a booming development period and should enjoy a certain valuation premium.
In 2025, continue to focus on the main line of special steel: NISCO (600282.SH), Jiuli Special Materials (002318.SZ), CITIC Pacific Special Steel (000708.SZ), Tiangong International (00826), Wujin Stainless (603878.SH), etc.
Risk Analysis
Steel is a capital-intensive industry and faces structural issues such as overcapacity. Currently, affected by weak demand in the real estate sector, the steel market is showing a trend of &#34;reduced supply, weak demand, rising inventory, falling prices, decreasing revenue, and declining profits,&#34; posing significant challenges to the production and operation of enterprises. With the continuous outbreak of localized wars, uncertainty in international situations, exchange rate fluctuations, and escalating trade protection and anti-dumping measures, the threshold for Chinese steel enterprises to enter export markets will be significantly raised. The new &#34;Environmental Protection Law,&#34; new pollutant discharge standards, and other related laws are being deeply implemented, with increased public awareness of environmental protection, leading to stricter regulatory and enforcement standards for enterprises

000932

000708

600019

603878

600282

CITIC Construction Investment released a research report indicating that with the implementation of supply reduction policies in the steel industry, industry profits have significantly improved. In July, the Central Financial Committee meeting emphasized the governance of low-price competition and promoted product quality improvement, leading to further increases in steel profits. Taking rebar as an example, the average gross profit per ton in July reached 213 yuan, a substantial increase compared to the first and second quarters. In the future, with the strict implementation of crude steel production cuts and the easing of iron ore supply, there is still room for steel profits to rise, and the position of steel companies in the market is expected to improve

Zhitong

Valin Steel

CITIC Pacific Special Steel

Baosteel

Wujin Stainless

NISCO

CITIC Construction Investment: Under the anti-involution trend, the steel industry's profits are rebounding. It is recommended to pay attention to enterprises related to ordinary steel, special steel, and new materials