Zhongtai Securities Steel Industry Strategy 2026: Cyclical rotation is optimistic about the steel bull market

The Zhitong Finance App learned that Zhongtai Securities released a research report saying that steel demand has exceeded expectations and is expected to remain stable for a long time in the future, while the pattern of scarce supply and demand on the raw material side eases, and profits in the steel sector are expected to rise in the future. In particular, the proportion of high-end products of leading companies continues to increase profits. The special steel sector focuses on targets with good performance. Benefiting from the development of downstream aerospace, oil and gas extraction, automobiles, etc., special steel consumption prospects are broad. Projects under construction by some special steel companies are being put into operation in an orderly manner, and performance is expected to grow steadily.

The main views of Zhongtai Securities are as follows:

Steel demand rebounds in 2025 and industry profits recover

In 2025, as the year-on-year decline in construction demand narrowed significantly, manufacturing demand remained resilient, and raw material prices were under pressure, making industry profits rebounded significantly this year.

China's steel demand will remain stable for a long time, and it is expected that supply will continue to be reduced

China has entered a period of economic transformation, and it is inevitable that the growth rate of steel consumption will slow down. However, since China's economy is still in the process of development and urbanization construction has not yet been completed, it is inappropriate to expect too pessimistic expectations for real estate or even total steel use, compounding the growth of steel used in the manufacturing industry and steel used in emerging fields. The bank expects that in the future, China's steel demand will remain stable for a long time. If subsequent steel supply continues to be reduced, steel mill profits will improve markedly.

Raw material side: Increased supply elasticity

The pattern of supply and demand for scrap steel has become relaxed. In the future, it will continue to suppress iron and water production and limit demand for raw materials. With the commissioning of the new FMG mining area and Simandou, coking coal imports will continue to recover, and the tight supply and demand pattern of iron ore and coking coal is expected to improve. In the future, central prices of iron ore and coking coal will decline for a long time, and the squeeze on steel mill profits will improve markedly.

Risk warning: risks caused by macroeconomic fluctuations at home and abroad; risk of a company's production capacity release falling short of expectations; risk of rising raw material prices; risk that public data used in research reports may not be updated in a timely manner; risk of industry size estimation, etc.