Tracking the concept of Hong Kong stocks | Expectations of steel supply-side reform rising again, can the industry's difficulties be reversed?

The long-silent steel concept sector suddenly surged in the afternoon of July 2, especially CHONGQING IRON (01053) which saw a violent surge of over 130% in midday trading. By the close, CHONGQING IRON soared by 91.11%, CHINAVTM MINING (00893) rose by 20.97%, Angang Steel (00347) rose by 12.73%, CHINA ORIENTAL (00581) rose by 11.45%, MAANSHAN IRON (00323) rose by 3.59%. A-share related concept stocks also surged simultaneously. On the news front, on July 1, the Central Financial and Economic Affairs Commission held its sixth meeting, emphasizing the need to deepen the construction of a unified national market, focusing on key points, regulating low-price disorderly competition by enterprises in accordance with the law, guiding enterprises to improve product quality, and promoting the orderly exit of backward production capacity. The market interprets this as strengthening expectations for supply-side steel reform. At the same time, the increased intensity of environmental protection and production restriction in Tangshan has also attracted high market attention. There are rumors in the market about the emission reduction and production restriction measures in Tangshan from July 4th to 15th. According to Mysteel's research on the whole process steel enterprises in Tangshan, about half of the steel mills have received notifications, and the rest of the majority of steel mills also indicated a high probability. On June 25, Mysteel's sintering ore data showed that 12 steel enterprises in Tangshan (accounting for 60% of capacity), sintering ore daily production of 270,000 tons, capacity utilization of 83%; if the planned implementation of production restriction policy, capacity utilization may decrease to 70%, sintering ore daily production may decrease by 30,000 tons. It is mentioned in the industry that the current steel demand is facing multiple challenges such as continuous downturn in the real estate industry, limited stimulus from infrastructure investment, and increasing pressure from overseas markets on China's steel exports. There is indeed a possibility of supply-side control of output to alleviate market supply and demand contradictions. If the government introduces relevant policies, it will further strengthen supply contraction on the basis of market-driven capacity reduction. However, the specific impact still needs to pay attention to the formal implementation of policies and enforcement intensity. However, after continuous harsh winters, the steel industry showed signs of recovery in the first half of 2025. According to data from the National Bureau of Statistics, in January-May 2025, the black metal smelting and rolling industry achieved operating income of 3,136.45 billion yuan, a year-on-year decrease of 7.0%; operating costs of 2,985.77 billion yuan, a year-on-year decrease of 8.7%; total profits of 31.69 billion yuan, a year-on-year increase from a loss to profit. Huachuang Securities previously pointed out that since the beginning of this year, the prices of major raw materials have continued to fall, the cost reduction of steel plants is more significant, providing certain guarantees for steel profits. Therefore, the profitability of steel plants has been restored to some extent. However, at present, demand support is relatively weak, and profit recovery mainly comes from cost-side concessions. In the future, if substantial crude steel control measures are implemented, the industry's supply is expected to begin to decline, on the one hand further suppressing raw material prices, on the other hand improving supply-demand relations to support steel prices, and then potentially bringing greater elasticity to steel profits. Cinda believes that the future of the steel industry is expected to stabilize and improve, combined with the fact that some companies are already in the undervalued zone, there are still structural investment opportunities at this stage. Particularly for special steel enterprises with relatively high profit margins and leading steel companies with strong cost control and economies of scale, there is an opportunity for valuation recovery in the future. Hong Kong stocks related to the steel industry: Angang Steel (00347): According to Ansteel Daily, recently, a research and development team led by Angang Steel, in partnership with several domestic units, independently developed and produced a dual-metal composite pipe made of "Inconel 625 nickel-based alloy + X65 pipeline steel" for deep sea oil and gas transportation in China. It is reported that the "Inconel 625 nickel-based alloy + X65 pipeline steel" dual-metal composite pipe realizes the high performance and low cost balance, making China's deep-sea dual-metal composite pipeline material technology at the forefront of the world. MAANSHAN IRON (00323): MAANSHAN IRON announced its first quarter results for 2025, with operating income of approximately 19.425 billion yuan, a decrease of 4.74% year-on-year; net loss attributable to shareholders of the listed company was approximately 144 million yuan, a decrease of 53.67% year-on-year; basic loss per share was 0.02 yuan. The announcement stated that the year-on-year decrease in losses in the first quarter of 2025 was mainly due to the company's strengthened accounting management and lean operation, continuous improvement in production efficiency, vigorous cost reduction efforts, while closely watching the market, adjusting procurement and sales strategies to cope with market downside pressure, turning a loss into a profit in March and achieving a total profit of 5.13 million yuan. CHONGQING IRON (01053): CHONGQING IRON released its first quarter report for 2025, with operating income of 6.614 billion yuan, a decrease of 14.51% year-on-year; net loss attributable to shareholders was 117 million yuan, a decrease of 64.82% year-on-year; basic loss per share was 0.01 yuan. The announcement stated that the significant year-on-year decrease in losses in the first quarter of 2025 was mainly due to the company's strengthened accounting management and lean operations, continued improvement in production efficiency, vigorous cost reduction, while focusing on market conditions, adjusting procurement and sales strategies to cope with market downward pressure, turning a loss into a profit and achieving a total profit of 5.13 million yuan. CHINA ORIENTAL (00581): CHINA ORIENTAL announced that for the three months ended March 31, 2025, the Group's self-produced steel products had sales of approximately 1.8 million tons, with a gross profit of about 100-150 yuan per ton, and an operating surplus of approximately 199 million yuan after deducting financial costs.