Recently, the steel industry has presented a complex picture characterized by an “expanding profit margin, diverging market sentiment, and volatile upward price trends.” On one hand, the turnaround of over half of the key steel enterprises from losses to profits after a previous slump has acted as a strong shot in the arm for the industry. On the other hand, international geopolitical factors (such as US-Iran negotiations) and domestic fluctuations in raw material costs continue to jangle market nerves. Amidst cautious optimism, the industry is stepping into a new stage where profit repair coexists with structural adjustment.
1. Improvement in Industry Fundamentals: Profitability Expands, Bolstering Market Confidence
Data released by multiple industry institutions shows that from the end of Q1 to the beginning of Q2 this year, the profit margin of China’s key steel enterprises has rebounded significantly, with over 50% of enterprises achieving profitability in the current period. Compared to the widespread losses in the second half of last year, this is undoubtedly a positive signal. The expansion of profitability is mainly attributed to the following key factors:
Marginal Improvement on the Demand Side: With the continuous exertion of the state’s “stable growth” policies, the progress of some infrastructure projects has accelerated. Demand for steel in manufacturing has maintained its resilience, particularly for special steels in high-end equipment and new energy sectors, providing stable order support for steel mills. Seasonal warming in demand has also played a pulling role.
Visible Effects of Active Supply-Side Regulation:The industry continues to deepen supply-side structural reforms. Through policy tools such as environmental performance grading and dual energy consumption controls, production is being guided to better match market demand. Some steel mills have effectively alleviated supply-demand contradictions by flexibly adjusting production rhythms and optimizing product mixes, avoiding excessive inventory accumulation and creating room for price stability and profit repair.
Partial Transmission of Cost Pressure:Although raw material prices remain high, steel mills have managed to transmit cost pressures to the mid-to-downstream sectors to some extent. This was achieved by increasing direct supply ratios, optimizing procurement strategies, and tentatively raising prices for certain products in Q1, thereby improving gross margin levels.
This expansion in profitability is not just an improvement in corporate financial health; more critically, it has stabilized the industry’s basic disk and the confidence of market participants. It indicates that China’s steel industry possesses stronger resilience and self-adaptive capabilities when coping with market cyclicality and external shocks.
2. The Game Between Macro Policy and Costs: US-Iran Talks and Raw Material Prices as Key Variables
Despite the improvement in profitability, the steel market has not entered a “fast lane” of unilateral upward movement. Instead, it continues to be pulled by dual forces of macro expectations and cost-side factors, presenting a volatile pattern with “pressure above and support below.” Currently, two external variables are particularly noteworthy:
Potential Impact of International Geopolitics: US-Iran Negotiations.Reports suggest that the US and Iran may open a new round of negotiations aimed at easing tensions in the Middle East. While this macro-political event seems distant from the steel industry, it exerts a profound influence through commodity pricing mechanisms. An easing of Middle East tensions could lower the risk premium in international crude oil markets, putting pressure on oil prices. As the blood of global industry, crude oil price fluctuations directly affect global inflation expectations, shipping costs, and petrochemical prices (such as coking products), indirectly altering the cost structure of steel production and transportation. If negotiations progress, it may provide a relatively loose environment for global manufacturing (including steel) from a cost perspective; conversely, any escalation of tensions could push up energy costs and exacerbate imported inflation. Therefore, the US-Iran negotiation process has become a “Sword of Damocles” hanging over commodity markets, affecting complex expectations regarding long-term costs and demand.
Rigid Support from Domestic Raw Material Costs.Prices of major raw materials like iron ore and coke, though fluctuating, remain in historically high ranges. In particular, the highly concentrated supply pattern of iron ore has not changed, and its price continues to erode steel enterprise profits. This means the foundation for profit repair in the steel industry is not yet solid; any rapid rise in raw material prices could quickly devour profit margins. High-level cost volatility determines that steel prices are unlikely to fall deeply, but it also blocks the space for short-term massive price hikes, making profit expansion rely more on internal management and technological cost reduction.
3. Market Outlook: Steel Prices Prone to Rise but Hard to Fall, Yet the Path Upward is Not Smooth
Synthesizing the current industry characteristics of “profit repair” and “intensified gaming,” we can make the following judgments on future steel price trends and industry directions:
In the Short Term:Steel prices will maintain a volatile but strong trend.
The”Strong” support lies in: reduced willingness of steel mills to aggressively cut prices for promotion after profit repair; the bottom-supporting effect of stable growth policies gradually landing; and rigid support from high costs.
The reason for”Volatile”is that: the intensity and sustainability of demand recovery still need observation, especially the impact of the real estate market adjustment on construction steel demand. Meanwhile, shifts in macro policy (like US-Iran talks) and raw material price fluctuations will frequently disturb market sentiment, causing price reversals.
In the Medium Term: The industry will enter a period of deep structural adjustment. The era of relying solely on output expansion and price gaming is over. Future competitiveness will be reflected in:
Green & Low-Carbon Competitiveness:Investment in and breakthroughs regarding ultra-low emission retrofits and low-carbon smelting technologies (e.g., hydrogen metallurgy) will become the “ticket” for enterprises to gain development space.
High-End Product Capability: Achieving import substitution and technological leadership in high-strength, corrosion-resistant, and special steels required for new energy vehicles, high-end equipment, and aerospace.
Supply Chain Synergy & Service Transformation:Shifting from manufacturers to material service providers. Through industrial internet platforms like “Jinri Steel” (Today’s Steel), companies can provide value-added services such as direct source procurement, precise matching, and supply chain services to enhance efficiency. As demonstrated by the “Jinri Steel” platform, integrating rich inventory categories like steel billets, hot rolled coils, strip steel, and rebar to achieve rapid response and on-time delivery is a manifestation of this transformation. Talent Structure Upgrade:High-quality development cannot happen without high-end talent support. Specialized and customized headhunting services (like the business conducted by “Jinri Steel Headhunting”) will help enterprises precisely acquire key talent in R&D, management, and digitalization, solving talent bottlenecks during transformation.
Currently, China’s steel industry stands at a critical crossroads. The profitability of over half of the steel enterprises is a hard-won positive signal, marking that the industry has preliminarily weathered the most difficult period. However, it is too early to celebrate. Uncertainties in international geopolitics (such as US-Iran talks), high raw material costs, and profound adjustments in domestic demand structure constitute hurdles that must be crossed. Looking ahead, under the dual influence of costs and policies, steel prices are highly likely to continue a “staggering upward trend.” For steel enterprises, the true test lies not in short-term price fluctuations, but in whether they can utilize this window of profit repair to unswervingly promote green, high-end, and intelligent transformation, ultimately establishing core competitiveness in the new track of high-quality development. The road to industry recovery is destined to be a contest of endurance and wisdom.
