Zhongtai Securities Co.,Ltd. released a research report indicating that steel demand has exceeded expectations and is expected to remain stable long-term. Meanwhile, easing supply-demand tensions in raw materials will likely boost profitability in the steel sector, particularly for leading companies with increasing high-end product portfolios that further enhance margins. The special steel segment shows promise with strong-performing targets, benefiting from downstream aerospace, oil & gas exploration, and automotive sectors. Several special steel producers are systematically commissioning new projects, supporting stable earnings growth. Key insights include:
1. **2025 Steel Demand Recovery Drives Profit Rebound** With construction demand declines narrowing significantly year-over-year and manufacturing demand remaining resilient, coupled with pressured raw material prices, industry profits have shown notable improvement in 2025.
2. **Long-Term Stable Steel Demand Amid Supply Constraints** China's economic transition has slowed steel consumption growth, but ongoing urbanization and economic development prevent excessive pessimism about real estate and overall steel demand. Growth in manufacturing and emerging sectors will sustain stable demand. Continued supply reductions could significantly improve mill profitability.
3. **Raw Materials: Improving Supply Elasticity** Scrap steel supply-demand has loosened, curbing pig iron output and raw material demand. New FMG mining areas and Simandou project startups, along with recovering coking coal imports, are expected to ease iron ore and coking coal shortages. Long-term price downtrends for these inputs should alleviate margin pressures on steelmakers.
**Risk Factors**: Macroeconomic volatility at home and abroad; slower-than-expected capacity expansion; rising raw material costs; potential delays in public data updates; industry sizing estimation risks.
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