Orient Securities released a research report stating that on December 12, the Ministry of Commerce and the General Administration of Customs issued an announcement to implement export license management for certain steel products, effective from January 1, 2026. The announcement covers 300 steel products across the entire supply chain, including pig iron, scrap steel, billets, plates, and sections.
In the short term, the new export license management system may curb the export volume of low-end steel products. However, in the medium to long term, the regulation of export products and order is expected to compel companies to adjust and optimize their capacity structure, promoting a return to supply-demand balance in the steel industry.
Orient Securities highlights the following key points:
1. **Export Structure Optimization** The reintroduction of export license management—after its cancellation in 2009—marks a new phase in China’s steel export regulation. In the first half of 2025, China’s steel exports increased by 9.2% year-on-year, while the average export price fell by 10.3%, reflecting structural imbalances in low-value competition. The new policy aims to shift exports toward higher-value products, retaining profits domestically and fostering industry upgrades.
2. **Balancing Domestic Capacity** With declining demand from the real estate sector—the largest consumer of steel—China’s apparent crude steel consumption dropped 4.4% year-on-year in 2024 to 890 million tons. Meanwhile, net exports surged over 30% to exceed 100 million tons, alleviating domestic overcapacity pressures. The export license system may initially suppress low-end exports but could drive long-term capacity optimization.
3. **Profit Stabilization and High-Quality Growth** The first shipment of 200,000 tons of high-grade iron ore from Guinea’s Simandou project on December 3 signals increased supply, likely pushing iron ore prices lower. Additionally, export regulations may ease low-end competition globally, further pressuring input costs. Orient Securities believes these factors, alongside peaking environmental capex, could stabilize steel profits and enhance shareholder returns.
**Investment Recommendations** - **Steel Sector**: Focus on companies with strong pricing power, stable profitability, and high dividends, such as Nanjing Iron & Steel (600282.SH) and CITIC Special Steel (000708.SZ). - **Others**: Consider Shandong Iron and Steel (600022.SH), Hunan Valin Steel (000932.SZ), and Sansteel Minguang (002110.SZ).
**Risks** Potential delays in policy implementation, domestic over-exporting driving up iron ore prices, and macroeconomic fluctuations affecting downstream demand.
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