Guosheng Securities: Crude steel production increased significantly in March, and demand from the consumption end continues to rise.

Guosheng Securities released a research report stating that according to Wind data, crude steel production in March 2025 was 92.84 million tons, a year-on-year increase of 4.6%, with a daily average production of 2.995 million tons, a month-on-month increase of 6.3%; crude steel production in the first quarter of the year was 259.33 million tons, a year-on-year increase of 0.6%. For ferrous metals, after the impact assessment is clear, domestic efforts to offset the adverse effects will increase. At the same time, the Central Economic Conference also proposed to "comprehensively rectify in-depth competitive behavior and regulate the behavior of local governments and enterprises." In the future, if industry supply-side adjustment policies are coordinated, the three cycles will resonate, speeding up the industry's return process. Guosheng Securities' main points are as follows: Crude steel production increases significantly, consumption is expected to continue to strengthen In March, the daily average production of crude steel increased by 5.2% year-on-year and 6.3% month-on-month. Steel mills' production enthusiasm significantly recovered, and the recent weak operation of black metal prices with insufficient financial attributes has lowered some raw material prices, continuing to drive steel companies' profit improvement. As of the week ending April 11, the steel mill profit ratio was 53.7%. Since August 2024, the issuance of government bonds has significantly accelerated, with a net financing amount of 879.2 billion for local bonds in March 2025, at a high level, and a net financing amount of 596.4 billion for national bonds, continuing to increase month-on-month. It is expected that the subsequent government investment scale will continue to increase, and government consumption expenditure may accelerate. Data from the National Bureau of Statistics show that in March 2025, the added value of large-scale industries increased by 7.7% year-on-year and 0.44% month-on-month, and the total retail sales of consumer goods increased by 5.9% year-on-year. In March, the business activities of enterprises accelerated, with the manufacturing purchasing managers index, non-manufacturing business activity index, and comprehensive PMI output index at 50.5%, 50.8%, and 51.4% respectively, an increase of 0.3, 0.4, and 0.3 percentage points from the previous month; in the first quarter, sales of manufacturing-related products increased significantly, with excavator sales increasing by 22.8%, car sales by 11.2%, and retail sales of household audiovisual equipment and household appliances by 29.3% and 38.4% respectively. In March, downstream demand significantly recovered, with the apparent steel consumption in March 2025 reaching 82.89 million tons, a year-on-year increase of 4.9%, an increase of 7.1 pct from the previous month. Steel net exports continue to grow, industrial downsizing and restructuring is expected to make progress In March, steel net exports increased by 9.96 million tons, an increase of 7.4% year-on-year. The growth of net exports is driven by price advantages and export rush factors. Regarding the ongoing escalation of the US-China trade war, it is difficult to judge the short-term impact of the tariff war, but historically, the decoupling intentions of the dominant countries will not change the final result. On the one hand, both countries will inevitably expand their finances during the struggle, and on the other hand, the end result is more likely to be a change in trade flow due to rising trading costs, thereby raising inflation. In March, iron ore imports decreased by 6.7% year-on-year, as high port inventories and factors such as the successive production of Guinea's West Mangdong iron ore suppressed recent ore prices. Recently, the National Development and Reform Commission released a report entitled "Report on the Implementation of the 2024 National Economic and Social Development Plan and the Draft 2025 National Economic and Social Development Plan", which clearly stated that this year will continue to implement crude steel production control to promote the downsizing and restructuring of the steel industry. From March 23 to 24, Xinjiang Bayi Iron & Steel, Kunlun Iron & Steel, Minxin Iron & Steel, and Kunyu Iron & Steel and other steel mills successively announced measures to reduce crude steel daily production by 10% starting from March 24 to promote the downsizing of the Xinjiang iron and steel industry. With the subsequent industry supply-side control and expectations for transformation and upgrading increasing, combined with the improving trend in demand, the medium- to long-term fundamentals of the steel sector are expected to continue to improve. Risk warning: Domestic production control policies do not meet expectations, downstream demand is lower than expected, and raw material prices rise sharply.