In 2024, the performance of listed companies in the steel industry was differentiated. The annual reports of 34 listed steel enterprises showed that 60% of them made profits while 40% suffered losses. 

In terms of net profit, 21 listed steel enterprises achieved profitability. Baosteel Co., Ltd. ranked first with a net profit of 7.362 billion yuan, followed by CITIC Special Steel Co., Ltd. in second place with a 

net profit of 5.126 billion yuan, and Nangang Co., Ltd. in third place with a net profit of 2.261 billion yuan.

The performance of steel enterprises is differentiated

The performance divergence of listed steel enterprises indicates from the side that China's economy has shifted from a stage of high-speed growth to a stage of high-quality development. The steel industry 

has a strong supply and weak demand, with the total demand declining rapidly. The demand for steel used in traditional real estate infrastructure has also decreased. In 2024, the national cumulative production 

of crude steel reached 1.005 billion tons, a year-on-year decrease of 1.7%. The apparent consumption of crude steel was 892 million tons, a year-on-year decrease of 5.4%.

The reporter of Futures Daily found from the annual reports of listed steel enterprises that the profitable steel enterprises are mostly those with management advantages and early layout in variety research and 

development and resource guarantee. Loss-making steel enterprises are mostly those with relatively single product structures, poor cost control, insignificant resource advantages of their own, or heavy debt burdens. 

The development of the steel industry has gradually shifted from the extensive development model that merely pursues scale advantages to the refined management model that pursues an advanced product structure.

From the product structure of listed steel enterprises, 60% of the profitable steel enterprises are constantly increasing the added value of high-quality steel, special steel, medium and heavy plates and the output proportion 

of special performance steel. Their downstream industries mainly target new quality productivity sectors such as new energy, ships and automobiles. For instance, the output of medium and heavy plates of Nangang Co., Ltd. 

accounts for 54% of its annual total output, which is mostly used in the fields of ships and Marine engineering. The gross profit margin of this product reaches 17.88%, which is much higher than that of special steel long products 

at 7.80% and construction threads at 2.32%. In contrast, for loss-making steel enterprises, although some have begun to actively explore transformation and upgrading, their product structure still mainly focuses on common 

materials. The prices of such products are greatly affected by market fluctuations. Against the backdrop of a significant decline in the steel price center in 2024, it is difficult to guarantee the profits of these enterprises.

In addition, China's steel export volume reached 110 million tons in 2024, an increase of 22.7% year-on-year. Some profitable steel enterprises have taken the opportunity to develop foreign trade business, bringing more 

substantial profit margins. For example, the gross profit margin of CITIC Special Steel's export products reached 19.06%, which was 7.12 percentage points higher than that of domestic products.

The risk awareness of listed steel enterprises has increased, and futures and derivatives can help enterprises achieve stable operation

Among the loss-making steel enterprises, Ling Steel Co., LTD., Shandong Iron & Steel, Maanshan Iron & Steel Co., Ltd. and Ansteel Co., Ltd. have carried out futures and derivatives hedging business. These four enterprises 

have reduced the decline in profit margin through hedging, with an average profit margin decline of 6.12%. The average profit margin of the six loss-making enterprises has decreased by 7.67%. The performance of the hedging 

enterprises is better than that of the non-hedging enterprises.

In 2024, steel mills faced significant operational pressure. In the face of complex internal and external situations, enterprises' awareness of risk management has significantly increased. A number of listed steel enterprises have 

established systematic and structured risk management models through years of practical exploration, which have played a crucial role in boosting their performance in recent years. CAI Yongzheng, the director of Jiangsu Fushi 

Data Research Institute, said.

CAI Yongzheng further explained that since 2021, affected by the economic cycle, the price center of steel and raw materials has shown a downward trend in a cyclical manner. Some listed steel enterprises have continuously locked 

in steel prices and profits through forward price lock-in orders and inventory preservation management. In the later stage, it not only avoided the risk of steel price decline, but also the center of raw material price kept shifting 

downward, and the order profit gradually increased. In the long term, it is of great strategic significance. With the continuous increase in the proportion of locked-price orders sold by enterprises, it has had a relatively obvious 

impact on the company's operating performance. During the order lock-up period, the enterprise, based on the basis, absolute price and the expected balance of supply and demand, did a good job in derivative hedging risk 

management, effectively improving the comprehensive benefits of the orders.

In the ever-changing market environment, industrial clients have become the "natural demand side" of futures market transactions. The entire futures industry is constantly improving its service level to safeguard the development 

of the real economy.

In the process of serving clients, our futures company provides one-on-one services based on the actual situation of industrial clients. Different enterprises have significant differences in their methods of using futures and 

derivatives. Steel enterprises that are deeply involved in the futures and derivatives market usually combine their production and sales plans with their judgment of market conditions, and take advantage of their greater sensitivity 

to profits and marginal changes in supply and demand within the industry to formulate complete hedging plans. Some steel enterprises are still in the stage of understanding and trying out futures and derivatives. At present, the 

main risk hedging method is still traditional inventory management. Li Qiang, the deputy general manager of Xinhu Futures, said that during the downward trend of steel prices, steel enterprises are simultaneously confronted with 

the problems of price drops and insufficient liquidity in the spot market. If steel enterprises use futures and derivatives to lock in profits in advance on the market, it can effectively alleviate the pressure of steel inventory sales and 

enhance the competitive edge of enterprises.

Qi Chunyi, a black metal researcher at the Commodity Research Institute of Galaxy Futures, told reporters that currently, most listed companies in China's steel industry can maturely utilize futures and derivatives, and have 

developed to the point of using exchange-traded and over-the-counter options tools to hedge against price fluctuation risks. However, in recent years, the pace of mergers and reorganizations among major enterprises has 

accelerated. Some steel enterprises have temporarily lost their hedging rights after being acquired by groups, and the total amount of hedging by steel enterprises has declined. However, the willingness of private steel enterprises 

to hedge has increased. In the past, private steel enterprises lacked interest in hedging due to insufficient relevant knowledge and talent reserves, coupled with the relatively high overall profit margin of the industry. With the 

continuous decline in steel prices in recent years, private steel enterprises have also realized the necessity of hedging. They have begun to actively contact futures companies, hoping to acquire more knowledge and operation 

models of hedging and expecting futures companies to provide professional hedging solutions based on their own situations.

Nearly 80% of listed steel enterprises made profits in the first quarter of this year

As of the end of April, 21 listed steel enterprises have released their first-quarter 2025 financial results, with nearly 80% of them making profits. In terms of net profit, Baosteel Co., Ltd. ranked first with a net profit of 2.434 billion 

yuan, followed by CITIC Special Steel Co., Ltd. in second place with a net profit of 1.384 billion yuan, and Nangang Co., Ltd. in third place with a net profit of 578 million yuan.

From the perspective of demand, in the first quarter of this year, stimulated by the "export rush", the export volume of steel reached 27.43 million tons, an increase of 6.3% year-on-year. Domestic steel demand has performed 

moderately well. The accelerated issuance of new special bonds and the continuous implementation of policies such as "two major" and "two new" have provided certain support for steel prices as demand recovers.

In terms of raw material prices, in the first quarter of this year, the price of iron ore dropped by 3.60%, that of coking coal by 12.81%, and that of coke by 11.75%. The declines were greater than those of rebar (down 3.09%) and 

hot-rolled coil (down 1.61%). The growth rate of raw material supply was faster than that of demand. Especially under the supply guarantee policy, the output of coal increased by 4.2% year-on-year. The loose supply has led to a 

significant decline in raw material prices, and the profits of steel enterprises have improved.

Data from the National Bureau of Statistics shows that from January to March 2025, the ferrous metal smelting and rolling processing industry achieved operating income of 1,828.64 billion yuan, a year-on-year decrease of 6.9%. 

Operating costs were 1,751.07 billion yuan, a year-on-year decrease of 8.7%. Overall, the decline in production costs for steel mills in the first quarter was greater than that in revenue.

Li Qiang believes that as the steel industry as a whole was in a pattern of "strong reality and weak expectations" in the first quarter of this year, steel enterprises, based on their cautious expectations of future demand decline, 

are more willing to use futures and derivatives to lock in profits in advance on the market.

Looking ahead, Li Qiang believes that in the face of the structural transformation of domestic downstream steel demand and the increasingly severe international trade pattern, Chinese steel enterprises, on the one hand, need to 

upgrade their processes and optimize their product structures in a targeted manner, and seek new industries in the existing market to enhance their own competitiveness. On the other hand, steel enterprises still need to enhance 

self-discipline and production control in the medium and long term. They should rationally arrange production plans based on market demand and sales conditions to ensure a dynamic balance between supply and demand. 

When the industry is in a profitable stage, they should have a forward-looking perspective and risk awareness, and scientifically lock in profits through the rational use of futures and derivatives to ensure the stability and 

sustainability of returns.

"Downsizing in the industry is a major trend. Steel enterprises need to reverse the traditional mindset of increasing production and efficiency and establish a downsizing development mindset." Pay attention to the optimization of 

product structure, green and low-carbon development, brand promotion and intelligent development, etc. Accelerate the exploration of new markets and deeply cultivate the downstream markets of the industry. For instance, 

increase investment in some forward-looking industries such as downstream new energy, low-altitude economy, humanoid robots, and domestically produced large aircraft. CAI Yongzheng said.

CAI Yongzheng believes that in the future, steel enterprises need to attach importance to the application of futures and derivatives, strengthen the construction of a "strong chain" in the industrial chain, plan and layout in the 

upstream and downstream of the industrial chain, carry out overseas business in regions rich in resources and with stable political situations, enhance their own supply chain control capabilities, and seek new low-cost supply 

channels in the international and domestic upstream mineral resources fields. Improve and optimize the traditional pricing models for resource procurement and product sales. Meanwhile, apply derivative tools to resist market 

fluctuation risks and enhance the competitiveness of enterprises.