Guosheng: The steel industry has entered a new stage of "placing equal emphasis on energy conservation and carbon reduction," and the medium- to long-term fundamentals of steel products are expected to continue improving.

Guosheng released a research report stating that steel output increased month-on-month in mid-September, and the steel industry has entered a new stage of "placing equal emphasis on energy conservation and carbon reduction." Expectations for subsequent supply-side regulation and transformation and upgrading of the industry remain, and combined with the trend of improving demand, the medium- to long-term fundamentals of steel products are expected to continue to improve. From a medium- to long-term value perspective, investors may focus on quality steel companies such as Baoshan Iron & Steel (600019.SH), Nanjing Iron & Steel (600282.SH), Hunan Valin Steel (000932.SZ), Fangda Special Steel Technology (600507.SH), and Xinyu Iron & Steel (600782.SH), Zhejiang JIULI Hi-tech Metals, which benefits from the oil and gas and nuclear power prosperity cycle, Xinxing Ductile Iron Pipes (000778.SZ), which benefits from pipeline network renovation and the earnings elasticity of ordinary steel, Jiangsu Changbao Steeltube (002478.SZ), which benefits from new coal power construction and the oil and gas prosperity cycle, and Yongjin Technology Group (603995.SH), which benefits from demand recovery and its nickel-plated steel shell business. Investment strategy: U.S. Treasury yields continue to climb, asset prices face further pressure, and the market is unlikely to show a trend-based performance in the near term. The U.S. fiscal deficit has remained high for a long time, causing a sharp increase in the supply of U.S. Treasuries. To make matters worse, U.S. corporate AI financing demand also has further expansion needs, which diverts funds while further pushing up U.S. Treasury yields. Therefore, regardless of whether the Federal Reserve raises interest rates later, U.S. medium- and long-term Treasury yields are expected to remain easy to rise and difficult to fall in the future. Against the backdrop of the United States stepping up absorption of global liquidity, the Chinese government has strengthened cross-border capital flow controls while promoting the long-term stable appreciation of the renminbi to hedge the impact of widening domestic and external interest rate spreads and ease pressure on the domestic market. However, the overall lack of incremental funds has also kept the market in a volatile state recently. Maintaining high U.S. interest rates will also make its own fiscal pressure increasingly heavy. Recent Fed rate hikes are beneficial for rebuilding the Fed's credibility. But under fiscal pressure, the bank believes that maintaining so-called independence in the future may be a luxury for the Federal Reserve. In the trade-off between fiscal policy and inflation, central banks in most countries will ultimately submit to fiscal policy, and fiscal dominance is likely to be the final outcome. A new round of fiscal deficit monetization may be gradually approaching. The long-term logic for gold remains solid. For industrial metals demand, it is necessary to observe the progress of future fiscal spending in providing support. Earlier, the leading companies in the steel industry were measured using replacement value, and their absolute valuation levels are currently at a low position. The main views of Guosheng are as follows: Molten iron production declined, and the decline in inventories widened. This week, the national blast furnace capacity utilization rate declined. The blast furnace capacity utilization rate of 247 domestic steel mills was 88.5%, down 0.8 pct month-on-month and down 1.9 pct year-on-year; weekly output of the five major steel product categories was 7.797 million tons, down 1.8% month-on-month and down 9.9% year-on-year; this week, molten iron production declined, with average daily molten iron production decreasing by 20,000 tons to 2.357 million tons, and weekly steel output fell, with the decline in rebar output larger than that of hot-rolled coil output. On the inventory side, this week the weekly social inventory of the five major steel product categories was 10.992 million tons, down 4.1% month-on-month and up 0.9% year-on-year; mill inventory was 3.828 million tons, down 2.2% month-on-month and down 9.2% year-on-year; total steel inventory fell 3.6% week-on-week, with the decline widening by 2.5 pct from last week, as both mill inventory and social inventory declined; based on output and total inventory data, the weekly apparent consumption of the five major steel product categories this week was 8.354 million tons, up 3.0% month-on-month and down 4.4% year-on-year, of which apparent consumption of rebar was 2.089 million tons, up 10.1% month-on-month and down 5.3% year-on-year. This week, apparent demand for the five major steel product categories improved, rebar apparent demand increased significantly, and hot-rolled coil apparent demand improved slightly. The weekly average transaction volume of construction steel was 98,000 tons, up 3.2% month-on-month; this week, spot steel prices were basically flat versus last week, immediate gross profit for mainstream steel product categories changed little, and the profitability rate of 247 steel mills was 6.9%, down 0.8 pct month-on-month. Steel output increased month-on-month in mid-September, and the steel industry has entered a new stage of "placing equal emphasis on energy conservation and carbon reduction." In mid-September 2026, key steel enterprises statistically tracked by the China Iron and Steel Association produced 1.855 million tons of steel per day, up 3.4% month-on-month. Based on this, it is estimated that nationwide daily steel output in mid-September was 3.74 million tons, up 1.7% month-on-month. Recently, the Ministry of Industry and Information Technology officially issued the "14th Five-Year Plan for Green and Low-Carbon Industrial Development," which explicitly requires that carbon dioxide emissions in the industrial sector reach a peak by 2030. Unlike in the past, the plan is no longer merely a directional call, but directly provides clear quantitative targets, specific institutional arrangements, and clear implementation paths. Expectations for subsequent supply-side regulation and transformation and upgrading of the industry remain, and combined with the trend of improving demand, the medium- to long-term fundamentals of steel products are expected to continue to improve. Steel pipe companies continue to benefit from expectations of increased coal power installed capacity and oil and gas prosperity. According to Wind data, from January to July 2026, completed domestic thermal power investment was 116.06 billion yuan, up 1.2% year-on-year, and completed nuclear power investment was 77.33 billion yuan, up 6.7% year-on-year. Against the current backdrop of energy self-control and accelerated planning and construction of a new energy system, related targets in coal power and nuclear power unit construction are expected to benefit significantly; in addition, targets related to oil and gas extraction and transportation pipelines are expected to benefit from the oil and gas industry prosperity cycle. Risk warning: domestic output regulation policies exceeding expectations, downstream demand falling short of expectations, raw material prices rising more than expected, and geopolitical risks.