According to the Zhitong Finance APP, Minsheng Securities released a research report stating that coking coal prices have rebounded, and attention should be paid to the resilience of demand in the off-season. This week, coking coal production continued to decline, coupled with expectations of adjustments to Mongolia's resource tax policy and the implementation of the Mineral Resources Law, leading to a halt in the decline of coking coal prices and a rise in black series prices. Against the backdrop of ongoing uncertainty in external demand and a weak recovery in internal demand, the possibility of regulating crude steel production has increased, along with a trend towards looser supply of iron ore and coking coal, which is expected to restore the profitability of steel companies.

In terms of internal demand, steel demand is gradually entering the off-season, with seasonal declines in apparent demand; in terms of external demand, the Trump administration raised the U.S. import tariff on steel from 25% to 50%, provoking protests from major importing countries such as Canada and Mexico, and indirectly affecting domestic steel export expectations. Fluctuations in external tariff policies remain the biggest uncertainty on the demand side.

The main points of Minsheng Securities are as follows:

Prices: This week, steel prices showed mixed trends. As of June 6, the price of 20mm HRB400 rebar in Shanghai was 3,140 yuan/ton, an increase of 10 yuan/ton from last week. The price of 8.0mm high line was 3,340 yuan/ton, a decrease of 10 yuan/ton from last week. The price of 3.0mm hot-rolled steel was 3,260 yuan/ton, an increase of 60 yuan/ton from last week. The price of 1.0mm cold-rolled steel remained stable at 3,580 yuan/ton. The price of 20mm common medium plate was 3,380 yuan/ton, a decrease of 40 yuan/ton from last week. This week, among raw materials, the domestic ore market price was stable with a slight decline, the imported ore market price fell, and scrap steel prices decreased.

Profits: This week, the profits of long-process steel increased. In terms of long-process, Minsheng Securities estimated that the gross profits of rebar, hot-rolled, and cold-rolled steel this week changed by +20 yuan/ton, +29 yuan/ton, and +8 yuan/ton respectively compared to the previous week. In terms of short-process, the gross profit of electric furnace steel decreased by 5 yuan/ton compared to the previous week.

Production and Inventory: As of June 6, the production of the five major steel varieties decreased, and total inventory decreased month-on-month. In terms of production, the output of the five major steel varieties this week was 8.8 million tons, a decrease of 0.47 million tons month-on-month, among which the output of construction steel decreased by 59,100 tons week-on-week, the output of plate increased by 54,400 tons week-on-week, and rebar production decreased by 70,500 tons to 2.1846 million tons this week. By different steelmaking methods, the output of long-process and short-process rebar this week was 1.9366 million tons and 248,000 tons, respectively, decreasing by 64,600 tons and 5,900 tons month-on-month.

In terms of inventory, the total social inventory of the five major steel varieties decreased by 16,100 tons to 9.2986 million tons this week, with total inventory in steel mills at 4.328 million tons, a decrease of 2,600 tons month-on-month, among which rebar social inventory decreased by 89,700 tons, and factory inventory decreased by 16,000 tons. In terms of apparent consumption, the apparent consumption of rebar this week was estimated at 2.2903 million tons, a decrease of 196,500 tons month-on-month, and the average daily transaction volume of construction steel this week was 103,700 tons, an increase of 1,980 tons month-on-month.

Recommendations: 1) Common steel sector: Baosteel, Valin Steel, NISCO; 2) Special steel sector: CITIC Special Steel, Yongjin Co., Ltd., Xianglou New Materials; 3) Pipe materials: Jiuli Special Materials, Wujin Stainless Steel, Youfa Group. Suggested focus: High-temperature alloy targets: Fushun Special Steel Risk Warning: Downstream demand is below expectations; steel prices have fallen sharply; raw material prices are highly volatile