Guotai Haitong: The market-oriented clearance in the iron and steel industry has begun to appear, and with the stabilization of demand, the fundamentals are expected to gradually improve.

Guotai Haitong released a research report stating that demand for steel in infrastructure and manufacturing sectors is expected to grow steadily, and even without considering supply policies, the steel industry has been operating at low profit levels for a long time. Market-driven clearance of supply has begun to appear, and the bank expects the fundamentals of the steel industry to gradually improve. If supply policies are implemented, the industry's supply will contract more quickly, and industry advances will accelerate. The bank maintains a "Buy" rating, bullish on steel companies with product structure and cost advantages benefiting fully, as well as leading companies with competitive advantages and profitability that will become more prominent. Guotai Haitong's main points are as follows: Demand decreased month-on-month, while inventory increased. Last week (referencing the week of February 23 to February 27, 2026), total social inventory of major steel products was 12.96 million tons, an increase of 1.14 million tons from the previous week; steel mill inventory was 5.50 million tons, up by 0.20 million tons. Specifically, social inventory of rebar was 5.68 million tons, up by 0.73 million tons; wire rod inventory was 0.88 million tons, up by 0.15 million tons; and hot-rolled coil inventory was 3.57 million tons, up by 0.17 million tons. In terms of steel mill inventory, rebar inventory was 2.33 million tons, up by 0.12 million tons; wire rod inventory was 0.85 million tons, up by 0.04 million tons; and hot-rolled coil inventory was 0.95 million tons, up by 0.01 million tons. Profit margins decreased month-on-month. Last week, iron ore inventory at 45 major ports in China was 170.92 million tons, an increase of 1.46 million tons. The average gross profit per ton of rebar was 192 RMB/ton, up by 6 RMB/ton from the previous week; simulated average gross profit per ton of hot-rolled coil was 54 RMB/ton, up by 18 RMB/ton from the previous week. The simulated average production profit per ton of rebar, lagging one month behind in costs, increased by 17 RMB/ton to 143 RMB/ton, while for hot-rolled coil, it increased by 29 RMB/ton to 5 RMB/ton. Ministry of Industry and Information Technology released the list of first batch of leading steel enterprises and normative steel enterprises. Demand is expected to stabilize, while supply is expected to continue shrinking. As the real estate industry undergoes deep adjustments, the proportion of steel demand from the real estate sector continues to decrease, with the negative impact on steel demand from real estate weakening. The bank expects a steady growth in steel demand from infrastructure and manufacturing. From the supply side, about 60% of steel companies are still operating at a loss, and market-driven clearance of supply has begun. The bank maintains expectations of supply contraction, with the fundamentals of the steel industry expected to gradually improve. Maintaining a "Buy" rating. In the long run, increasing industry concentration and promoting high-quality development are inevitable trends for the future development of the steel industry. Steel companies with product structure and cost advantages will benefit fully; in the context of stricter environmental regulations, ultra-low emission transformations, and carbon neutrality, the competitive advantages and profitability of leading companies will become more prominent. Risk warning: Supply contraction not meeting expectations, significant drop in demand.