The Zhitong Finance App learned that Guosheng Securities released the 2026 Steel Industry Interim Report and concluded that the interim report data showed that steel mill profits declined year on year, and the pattern of industry segmentation continued. It is expected that financial execution will gradually accelerate after the third quarter, thereby underpinning demand. If supply contraction policies such as “reverse internal circulation” and carbon dual control in the later stages of the industry are strictly implemented, the current sluggish profit situation of steel companies will be reversed, and the sector will also have excess profits. Earlier, the agency used replacement value to measure leading companies in the industry. Currently, these companies are in a low position in absolute valuation. From a medium- to long-term value perspective, we can focus on high-quality steel companies such as Baosteel Co., Ltd., Nangang Steel, Valin Steel, Fangda Special Steel, and New Steel Co., Ltd.
Guosheng Securities's main views are as follows:
Industry profit: This year's total policy is the same as last year, but it is more focused on structural transformation. However, the reform will have the effect of a certain fiscal contraction; the actual level of fiscal easing will be lower than in 2025. Looking at the first half of the year on a quarterly basis, the gross domestic product in the first quarter increased by 5.0% year on year. The second quarter policy entered a period of observation contraction. With the fiscal contraction effect, growth in the second quarter slowed to 4.3%. Weakening steel prices in the first half of the year coexisted with rising costs. The total profit of the industry was 31.77 billion yuan, down 25% year on year. The industry's gross profit per ton of steel in the first half of the year was 63.5 yuan, down 26.3 yuan year on year. The share of steel companies in upstream and downstream profit distribution once again fell to about 7%, far lower than the average value of 21% since 2011-2025.
Interim report: In the first half of 2026, the revenue of listed steel companies fell 2.5% year on year, and costs fell 1.9%. The main reason for the larger revenue decline was that the industry reduced production, and the capacity utilization rate remained high. At the same time, demand weakened in the second quarter, bargaining power in the middle smelting process was impaired, and passively accepted the rising prices of bifocal and iron ore, which led to additional cost increases. The sample steel companies achieved net profit of 6.21 billion yuan, a year-on-year decrease of 54.7%. The net profit margin on sales was 0.7%, down 0.8 pct year on year. Financial reports show that the industry's expense ratio increased slightly during the comprehensive period, debt service indicators improved slightly, the balance ratio remained flat year on year, and the number of inventory turnover days increased slightly. There was little overall change.
Significant differentiation: In the first half of 2026, special steel revenue increased by 2.2%, steel pipe and general steel fell by 6.2% and 0.9% respectively, and the gross sales margin of special steel decreased by 0.6 pct, 2.5 pct, 0.7 pct to 7.6%, 6.4%, and 5.6% year on year. The main profit difference stemmed from the different characteristics of the downstream industry. Steel pipes were widely used in the energy oil and gas industry, and oil valves were closed due to geopolitical conflicts. Demand for oil and gas pipelines in the Middle East declined in stages, while downstream demand for special steel increased steadily, and high-end special steel prices were sensitive. Weak support for profit recovery, while Pugang's profits declined in the second quarter due to weak demand and falling short of expectations in the implementation of the production limit policy. Since 2021, demand for construction steel corresponding to long materials has continued to decline, while manufacturing and export demand corresponding to plate has gradually rebounded, becoming the main part contributing to the increase in steel demand. Whether in terms of absolute value or fluctuation in gross margin net margin, plate has stronger profitability.
Investment strategy: Focus on the implementation of “strengthening domestic demand and optimizing supply” on the policy side, which is expected to promote phased improvements in fundamentals. The transformation of the economy will take some time. There are few systemic risks to the economy during this period, but there is not much chance that the systemic growth rate will rise. The future will become accustomed to a pattern of convergence in which the economy hovers between recession and recovery. The economy continues to converge, so that the economy is stable enough to carry out structural reforms.
Risk warning: Overseas economies have experienced severe turmoil, surrounding geographical conflicts have intensified, domestic fiscal expenditure falls short of expectations, and implementation of production restrictions has not been effective.