The price trend on the raw material side was divergent in April due to a marked drop in shipments from Australia and Brazil. At the same time, the resumption of steel mill production continued to advance, and iron ore fundamentals improved marginally, supporting the strengthening of mineral price shocks. Affected by slow growth in iron and water production and poor willingness to replenish stocks, demand in the bifocal market was still weak, and bifocal prices were weak.

Huabao Securities released a research report saying that in April, as the release of steel mill supply gradually progressed, combined with national policies to stimulate downstream demand, the overall rate of steel de-stocking accelerated in April. Due to the strong desire for steady domestic growth, the market has strong expectations for steel demand, and steel supply is growing faster than demand. Under strong expectations and weak reality, the steel supply and demand pattern tends to relax, and overall steel prices fluctuate and weaken.

Due to weakening raw material prices and a downward shift in steel mill production costs, the overall profits of steel companies showed a phased improvement. However, there were differences between varieties. Losses on threads and hot rolls continued to narrow, and cold roll profits declined.

Favorable real estate policies have been released centrally, and the speed of physical workload due to combined infrastructure-side investment is expected to accelerate. Manufacturing industries such as automobiles and home appliances will continue to be booming, and steel demand is expected to be supported. The improvement in profits of steel companies stimulates the enthusiasm of steel mills to produce. It is expected that the capacity utilization rate of steel mills will continue to grow in May. As the flood season in the south will advance northward from the Pearl River basin to the Yangtze River basin, terminal demand will be limited due to droughts and floods, and compounded cost support is strengthened. It is expected that steel prices will continue to fluctuate.

CICC released a research report saying that the current manufacturing industry outlook indicators have improved. Looking ahead, demand expectations are expected to be repaired, and it is difficult to falsify in the short term. Leading steel companies in the underrated manufacturing industry may gradually recover their profits and valuations, and excess profits can be expected.

Companies related to the steel sector:

Angang Steel Co., Ltd. (00347), Chongqing Iron & Steel (01053), Maanshan Iron & Steel (00323), China Oriental Group (00581)