Iron and steel stocks hit new highs, industry transformation is imminent

Abstract According to a report by China Voice’s "National News Network," the China Steel Association announced that the inventory of its member companies has surpassed 14.5 million tons, hitting another record high. This signals that the steel industry is on the brink of significant transformation. The association's preliminary outlook for the steel sector this year suggests a shift from the unusually challenging conditions of last year, with expectations of entering a phase of stable growth. This prediction is based on several factors: an increase in the supply of raw iron ore, a potential decline in prices, and a moderate rise in demand for steel from sectors such as railways, urban infrastructure, and rail transit. Xu Yongbo, an analyst at Treasure Island Steel, also noted that steel prices reached a peak in the second quarter of this year. He believes that the new government may introduce supportive policies, such as initiatives for high-income housing, urbanization projects, and the development of high-value, high-tech industries, all of which could boost domestic demand. While the overall market situation has improved slightly, the massive inventory remains a critical challenge for the industry. Recent data shows that in early March, the daily crude steel output exceeded 2.08 million tons, marking a record high. Although this number has since declined, production levels remain elevated. Yu Yong, general manager of Hebei Iron and Steel Group and chairman of Tangshan Iron and Steel Group, warned that the most difficult period for the industry has not yet arrived. He explained that while supply and demand are currently balanced, no steel company is shutting down due to unsold products. Instead, the issue lies in profitability—many companies are operating at a loss or with minimal margins. The real challenge, according to Yu, will come when demand shifts, leaving certain products without a clear path forward. Simply expanding scale or competing on price is no longer a sustainable strategy. In a landscape where low returns have become the norm, Yu emphasizes that steel companies must take advantage of the current period to restructure internally. He highlights the need to address long-standing issues such as structural inefficiencies, product quality, and outdated business models. The era of easy profits in the steel industry is over, and companies must now focus on improving quality, innovation, and operational efficiency to survive and thrive in the evolving market.