[SMM Hot Topic] Semi-Annual Reports of Steel Companies Released, Net Profits of Many Steel Companies Show Improvement

[SMM Hot Topic] Semi-Annual Reports of Steel Companies Released, Net Profits of Many Steel Companies Show Improvement

In H1 2025, affected by the decline in raw material prices such as iron ore and coking coal, the operating performance of the steel industry continued to recover. However, the domestic steel industry still exhibited a "three highs and three lows" pattern of "high production, high costs, high inventory, low demand, low prices, and low profitability," with the overall market in a bottom-grinding phase. Downstream demand remained weak, with supply outpacing demand. Coupled with prices of raw fuels fluctuating at highs, the actual decline in cost centers was smaller than that in steel prices, resulting in steel prices generally in the doldrums. The steel market remained caught in a contradiction between strong expectations and weak reality.

Summary of Data from the 2025 Semi-Annual Reports of 27 Steel Companies

According to the 2025 semi-annual reports disclosed by 27 steel companies, 17 of them achieved net profitability since the beginning of the year, and 20 companies saw YoY net profit growth, showing an overall improvement compared to the same period last year.

Among them, Xingang Co., Ltd., which achieved significant net profit growth, explained in its semi-annual report that by adhering to the principles of "four modernizations" and "four essentials," focusing on enhancing value creation capabilities, and firmly promoting account-based operations, it optimized the "maximum scale" aspect of its "Three Extremes Xingang" development philosophy to "maximum efficiency." Meanwhile, through deepening cost reduction and efficiency enhancement efforts and implementing efficient measures such as benchmarking, "dual return, two disclosures," the company achieved results in some key areas. Particularly in terms of efficiency, the company proactively reduced production scale to mitigate market price decline risks. In Q1, apart from arranging a total of 53 days of systematic maintenance centered around the No. 10 and No. 9 blast furnaces, the company generally operated at full capacity; starting from Q2, it pursued intensive and efficient production, significantly improving the efficiency of various production processes by enhancing indicators such as the blast furnace utilization coefficient. As a result, in the first half of the year, the company achieved revenue of 17.512 billion yuan and a total profit of 163 million yuan, turning losses into profits compared to the same period last year.

According to statistics compiled by SMM, among the companies in this semi-annual report, those still experiencing net profit losses include Bensteel Group Sheets & Plates, Angang Steel, Bayi Iron & Steel, JISCO Hongxing, Lingyuan Iron & Steel, Fushun Special Steel, Xining Special Steel, Chongqing Iron & Steel, Hangzhou Iron & Steel, and Maanshan Iron & Steel.

Among them, Bensteel Group's sheets & plates, which suffered the largest losses, stated in the report that it faces three major risks. First, the raw material market is volatile and unpredictable, with coking coal and coke significantly impacted by safety, environmental protection, and geopolitical factors. Price fluctuations in the market affect corporate profits, creating substantial pressure on cost control. Second, the industry as a whole is in a deep adjustment period transitioning from incremental expansion to stock optimization, with the supply-demand imbalance intensifying. Although China has implemented policies to stabilize growth, investment growth has slowed, and it will take time for these policies to translate into actual downstream demand recovery. Demand growth for steel products remains uncertain, and competition among homogeneous steel products is becoming increasingly fierce. Third, under the constraints of China's "carbon peak" and "carbon neutrality" goals, environmental authorities have strengthened supervision over pollution control in the steel industry. Companies face higher requirements for environmental compliance, energy conservation, and emission reduction, leading to increased environmental protection investments and operational costs, as well as greater environmental challenges.

Fushun Special Steel, which saw the largest YoY decline in net profit, also noted in its report that although the company made every effort to advance technological marketing, process cost reduction, host efficiency improvement, and digital transformation during the reporting period, overall production scale in H1 remained basically stable. However, affected by market demand, orders and prices for some products declined compared to the previous period. New projects were gradually put into operation, but actual production fell short of expectations, leading to higher fixed cost allocation per product. Additionally, to meet the industry's demand for quality improvement and development, the company enhanced quality control and requirements, resulting in higher quality costs and a significant decline in profitability.

Outlook

In summary, against the backdrop of overcapacity and weak demand, China's steel industry has continued to optimize overall capacity this year. Although crude steel production saw a slight decrease, exports rose noticeably YoY, effectively alleviating domestic demand pressure. According to CISA data, on the demand side, steel demand from the real estate sector continued to contract, while demand from manufacturing sectors such as infrastructure, automobiles, ships, and home appliances grew steadily. Supply side, although the steel price index still declined YoY, the cost reductions for raw materials such as iron ore and coke were more pronounced. The increase in profit per mt of steel became a driving factor for the profit improvement of steel enterprises.

In H2, efforts will continue to focus on expanding investment and domestic demand, proactive fiscal policies, and appropriately accommodative monetary policies, with timely additional measures. The macro economy is expected to maintain its rebound and upward momentum. Against the backdrop of advancing industry capacity governance and curbing disorderly competition, outdated and inefficient capacity will gradually phase out, and domestic industry chain order is expected to improve. Demand side, the automotive, home appliance, energy, and shipbuilding sectors demonstrated steady demand, while high-quality urban renewal is expected to restore infrastructure steel demand. However, it is noteworthy that due to escalating trade protection and anti-dumping measures in Southeast Asia, enterprises may face pressure in overseas business expansion and exports. Therefore, in H2, enterprises need to continuously build core technological and marketing competitiveness, adhere to full-capacity production and sales, deepen product operations, and strengthen technological innovation; persistently advance raw material procurement reforms, implement cost-based procurement, and execute cost-reduction measures; continuously enhance multi-base production and supply coordination, leverage the advantages of multi-base synergy, fully stimulate internal momentum, consistently improve manufacturing capabilities, and promote digital transformation.

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