As of February 6, the blast furnace capacity utilization rate of sampled steel enterprises stood at 85.7%, up 0.22 percentage points week-on-week. The electric furnace capacity utilization rate of sampled steel enterprises reached 48.1%, down 7.59 percentage points week-on-week. As of February 6, production of the five major steel products totaled 7.208 million tons, down 15,500 tons week-on-week, a decrease of 0.21%. As of February 6, average daily pig iron output reached 2.2858 million tons, up 6,000 tons week-on-week and 1,400 tons year-on-year.

Demand Situation. As of February 6, consumption of the five major steel products totaled 7.607 million tons, down 410,800 tons week-on-week, representing a 5.12% decrease. As of February 6, mainstream traders' construction steel transaction volume reached 35,000 tons, down 32,500 tons week-on-week, a 48.24% decrease.

Inventory Situation. As of February 6, social inventories of the five major steel products stood at 9.404 million tons, up 496,800 tons week-on-week (5.58%) but down 18.04% year-on-year. Factory inventories of the five major steel products reached 3.973 million tons, increasing by 95,600 tons week-on-week (2.47%) but down 24.13% year-on-year.

Steel Prices & Profits. As of February 6, the General Steel Composite Index stood at 3,414.2 RMB/ton, down 13.31 RMB/ton week-on-week (-0.39%) and down 5.51% year-on-year. As of February 6, the special steel composite index stood at 6,582.0 RMB/ton, down 2.28 RMB/ton week-on-week (a 0.03% decrease) and down 2.88% year-on-year. As of February 6, the tonnage profit for rebar production via blast furnaces was CNY 65/ton, up CNY 14.0/ton week-on-week, representing a 27.45% increase. As of February 6, the tonnage profit for construction steel production via electric arc furnaces was -CNY 76/ton, up CNY 4.0/ton week-on-week, representing a 5.00% increase.

Raw Material Situation. As of February 6, the spot price index for Australian iron ore fines (62% Fe) at Rizhao Port stood at 764 RMB/ton, down 29.0 RMB/ton week-on-week, a decrease of 3.66%. As of February 5, the warehouse-delivered price for main coking coal at Jingtang Port was 1,700 RMB/ton, down 80.0 RMB/ton week-on-week. As of February 6, the ex-factory price of Grade 1 metallurgical coke was CNY 1,770 per ton, unchanged week-on-week. As of February 6, the coke inventory days of sample steel mills stood at 12.76 days, up 0.2 days week-on-week but down 0.5 days year-on-year. As of February 6, the average days of imported iron ore inventory for sampled steel mills stood at 31.29 days, up 2.6 days week-on-week and 6.2 days year-on-year. As of February 6, the days of coking coal inventory for sampled independent coking plants reached 16.51 days, increasing by 0.8 days week-on-week and 4.7 days year-on-year.

As of February 6, the daily average pig iron output was 2.2858 million tons, up 6,000 tons week-on-week and 1,400 tons year-on-year. Social inventories of the five major steel products increased by 5.58% week-on-week, while factory inventories of these products rose by 2.47% week-on-week. This week, Australian iron ore fines (62% Fe) at Rizhao Port fell by CNY 29.0/ton, while main coking coal warehouse delivery prices at Jingtang Port dropped by CNY 80.0/ton. Noteworthy is the social inventory of the five major steel products: As of February 6, social inventory stood at 9.404 million tons, up 496,800 tons week-on-week (5.58%), but down 18.04% year-on-year. Factory inventories of the five major steel products: As of February 6, factory inventories totaled 3.973 million tons, up 95,600 tons week-on-week (a 2.47% increase) but down 24.13% year-on-year. We believe the current inventory accumulation pressure for the five major steel products is relatively limited. Overall inventory remains at a historically low level, and the accumulation pace is slower than in previous years. Combined with the recent supply support from safety inspections potentially causing a slight contraction in local production capacity, the inventory pressure on steel products is constrained. Currently, the profit per ton for ordinary steel is substantial. Against the backdrop of the industry's “anti-internal competition” trend, ordinary steel companies have significant room for performance improvement and are likely to see a value recovery. The steel sector may also present a favorable opportunity for allocation.

Based on our analysis of the steel industry cycle, at present—with PPI at the bottom of its cyclical range, ample market liquidity, and upward revisions to risk premiums—the steel sector possesses strong “anti-involution” attributes and substantial profit recovery potential. High-quality steel enterprises exhibit excellent upward elasticity driven by gradual earnings recovery, coupled with valuation uplift potential stemming from improved supply dynamics. The sector continues to present strategic investment opportunities over the medium to long term.

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