Guotai Haitong: Steel demand recovers and increases after the holiday, inventory returns to a downward trend.

Guotai Haitong released a research report stating that the apparent consumption of the five major types of steel products last week was 8.7541 million tons, an increase of 1.2398 million tons compared to the previous week; among them, the apparent consumption of construction materials was 3.0417 million tons, an increase of 0.8155 million tons; the apparent consumption of plate materials was 5.7124 million tons, an increase of 0.4243 million tons. The production of the five major types of steel products was 8.5695 million tons, a decrease of 0.0636 million tons compared to the previous week; the total inventory was 15.8226 million tons, a decrease of 0.1846 million tons, maintaining a low level. Currently, the steel demand is expected to gradually bottom out; even without considering supply policies, the industry has been facing long periods of losses, and market-driven supply clearance has begun to appear, with expectations that the fundamentals of the steel industry will gradually improve. If supply policies are implemented, the industry's supply contraction will be faster, and the industry's upward progress will happen more quickly. The main points of Guotai Haitong are as follows: Demand is expected to stabilize, while supply is expected to contract Last week (referring to October 13-17, 2025) the apparent consumption of the five major types of steel products was 8.7541 million tons, an increase of 1.2398 million tons compared to the previous week; among them, the apparent consumption of construction materials was 3.0417 million tons, an increase of 0.8155 million tons; the apparent consumption of plate materials was 5.7124 million tons, an increase of 0.4243 million tons. The production of the five major types of steel products was 8.5695 million tons, a decrease of 0.0636 million tons compared to the previous week; the total inventory was 15.8226 million tons, a decrease of 0.1846 million tons, maintaining a low level. Last week, the blast furnace capacity utilization rate of 247 steel mills was 84.27%, unchanged from the previous week; the blast furnace capacity utilization rate was 90.33%, a decrease of 0.22 percentage points compared to the previous week; the electric furnace operation rate was 60.9%, an increase of 0.64 percentage points compared to the previous week; the electric furnace capacity utilization rate was 52.5%, an increase of 0.47 percentage points. Profitability has decreased compared to the previous week Last week, 14.278 million tons of imported iron ore inventory increased by 2.53 million tons. Last week, the simulated average gross profit per ton of rebar was 111.6 yuan/ton, a decrease of 34.3 yuan/ton from the previous week, and the simulated average gross profit per ton of hot coil was 21.6 yuan/ton, a decrease of 67.6 yuan/ton. The profitability rate of 247 steel companies was 55.41%, a decrease of 0.87% compared to the previous week. Looking ahead, it is expected that iron ore production will accelerate, but demand may not increase significantly. The iron ore market may gradually enter a loose cycle, with limited upward elasticity in iron ore prices. Factors constraining steel costs are expected to gradually improve, and the industry's profitability is expected to gradually recover. Demand is expected to stabilize, while supply contraction is maintained The continued downturn in the real estate sector has led to a decrease in the proportion of demand from the real estate sector, and the negative drag on steel demand from the real estate sector is expected to weaken; demand from infrastructure and manufacturing sectors is expected to grow steadily. In terms of exports, steel exports from January to August maintained a year-on-year growth. Overall, it is expected that steel demand will gradually stabilize. From the supply side, the industry has been in a loss since the third quarter of 2022, with nearly 40% of steel companies still operating at a loss. Market-driven supply clearance has begun to appear. From a policy perspective, the recently released "Steady Growth Plan for the Steel Industry (2025-2026)" proposes to "continue to implement production reduction policies, implement annual production control tasks in accordance with the principle of supporting the development of advanced enterprises and inducing the exit of backward and inefficient capacity, and promote dynamic balance between supply and demand." Maintaining expectations of supply-side contraction, the fundamentals of the steel industry are expected to gradually improve. Maintain a "Buy" rating In the long run, the increase in industry concentration and the promotion of high-quality development are inevitable trends in the future development of the steel industry. Steel companies with product structure and cost advantages will benefit fully; under the background of stricter environmental protection, ultra-low emission transformation, and carbon neutrality, the competitive advantages and profitability of leading companies will become more apparent. In terms of recommendations, focus on the following: 1) Baoshan Iron & Steel (600019.SH), which leads in technology and product structure, Hunan Valin Steel (000932.SZ) and Beijing Shougang (000959.SZ), which have continuously upgraded product structures, Fangda Special Steel Technology (600507.SH) and Xinyu Iron & Steel (600782.SH) as low-cost and flexible steel companies. 2) CITIC Pacific Special Steel Group (000708.SZ) and Yongjin Technology Group (603995.SH), which have competitive advantages with low valuation and high dividends; Zhejiang JIULI Hi-tech Metals (002318.SZ), Suzhou Xianglou New Material (301160.SZ), and POCO Holding (300811.SZ) as companies with high barriers in materials; Jiangsu Toland Alloy (300855.SZ) and Fushun Special Steel (600399.SH) as leaders in high-temperature alloys. 3) Under the trend of demand recovery, look for upstream resource companies with long-term advantages, such as Hbis Resources (000923.SZ), Dazhong Mining (001203.SZ), Sichuan Anning Iron And Titanium (002978.SZ), Inner Mongolia ERDOS Resources (600295.SH), Yongxing Special Materials Technology (002756.SZ) and Inner Mongolia BaoTou Steel Union (600010.SH). Risk warning Supply contraction falls short of expectations, and demand drops significantly.