At the end of the second quarter, the steel price index was 4,110 yuan/ton, down 3.29% year-on-year. The market price has turned negative again since March, indicating that the supply-demand relationship has weakened again. This is also the supply-side structural reform since the fourth quarter of last year. After the weakening results, the release of new capacity became the core repressive factor. In terms of inventory, the total social inventories at the end of the second quarter was 11.22 million tons, which was lower than the market size of 9.39 million tons in the same period of last year, an increase of 9.44% year-on-year. Market inventories began to increase and the relationship between supply and demand weakened.

Both crude steel production and steel mill inventory size are in the high range. From the daily average crude steel output of key enterprises, the average daily average crude steel volume in the second quarter exceeded 2 million tons, higher than the average of 1,947,100 tons in the same period of last year, and also higher than the average of 1.88 million tons in the previous quarter. Steel production hit a new high. The total inventory of steel mills as of mid-May was 12.68 million tons, slightly lower than the 13.91 million tons in the same period of last year, indicating that the market supply and demand weakening pressure can be controlled.

The industry's environmental protection policy has been adjusted, the operating rate of blast furnaces has increased, and the profitability of steel mills has weakened. In terms of production, the average operating rate of blast furnaces in the second quarter was 69.85%, which was higher than 69.5% in the same period of the previous year and also higher than the average of 66.79% in the first half of the year. In terms of profit, the average profit of steel mills in the second quarter was 81.03%, lower than that. 84.66% in the same period of the year showed that the industry's profitability has weakened.

In terms of short-process steel making, profits also reflected a weakening trend. In the second quarter, the average profit per ton of electric furnace was 301 yuan/ton. Although it was much higher than the average profit of the first quarter of less than 50 yuan/ton, it was still slightly lower than that. The same period last year's 362 yuan / ton, showing a weakening supply and demand relationship with the long process steel mills.

Steel exports have insufficient incentives to improve supply pressure. In May, steel exports were 5.743 million tons, down 16.53% year-on-year, lower than the cumulative growth of 2.5% in the first five months. In the first five months, the total steel exports were 29.09 million tons, up from 28.49 million tons in the same period last year, indicating overseas. It is difficult for the market to share the pressure of domestic supply.

The high investment in fixed assets of the steel industry and the rapid release of production, the launch of capacity. The fixed assets investment in the iron and steel industry is at a high level. The data shows that the fixed assets investment in the first four months was 43.3% year-on-year, higher than the 2.7% in the previous month and 5.3% in the same period of last year, which was in a high-speed growth trend. At the same time, the output appeared fast. This is the pressure from the accelerated production capacity investment and capacity injection on the market since our third quarterly report last year. It is also the fulfillment of the starting point of the new production cycle in our industry. In the first five months, the cumulative growth rate of crude steel production and pig iron production was 10.2% and 8.9%, respectively, which was significantly higher than 5.4% and -0.6% in the same period of last year, indicating that production was in an accelerated stage. In addition, since the beginning of this year, the production of pig iron has increased sharply, and the gap with the growth rate of crude steel has been greatly reduced. This indicates that the investment in capacity this year is more inclined to the long-run steel mills, and the short-flow capacity investment may have a certain slowdown.