Reference | Interpretation of the second half market based on silicon steel supply and demand

　　Overview: Reviewing the first half of 2025, China's silicon steel market showed a pattern of strong supply and weak demand, with spot prices continuously declining. From the price trend perspective, after a rapid price surge last September, the lowest price in the first half of the year fell below last year's low point. Since the beginning of this year, except for a slight rebound in late May due to a brief boost from new energy demand, the overall trend remained downward. Demand in other sectors showed little concentrated release, and the silicon steel industry experienced a "peak season without peak" trend. Fundamentally, supply continued to grow in the first half, private enterprises' production profits declined, foreign trade volume of silicon steel remained acceptable, and total inventory slightly decreased. Under the premise that demand could not be effectively released, there was significant upward pressure on silicon steel market prices. Looking ahead to the second half, where will China's silicon steel market head? This article will analyze based on industry fundamentals and macro conditions.

　　1. Price Fluctuated Downward in the First Half, Brand Price Differences Fluctuated Significantly

　　As of June 30, the Mysteel non-oriented silicon steel 800 grade price index was 4409.66 points, down 15.28% year-on-year. Regarding spot prices, according to Mysteel data, the average price of non-oriented silicon steel 800 grade in 13 cities nationwide was 4369 yuan/ton, down 13.7% year-on-year; the average price of non-oriented silicon steel 300 grade was 6034 yuan/ton, down 8.2% year-on-year.

　　Figure 1: Absolute Price Index Trend of Non-Oriented Silicon Steel (Unit: yuan/ton)

　　Data Source: Steel Union Data

　　In 2024, domestic silicon steel showed a high start and low finish throughout the year, with the price center further moving downward, rebounding from an oversold state in September to November. From January to April 2025, non-oriented silicon steel spot prices fluctuated within a narrow range, and prices gradually weakened starting in May. As of June 30, the national average price had cumulatively dropped by 479 yuan/ton, state-owned enterprise resources dropped by 400 yuan/ton, and private enterprise resources dropped by 600 yuan/ton.

　　Figure 2: Price Difference Between State-Owned and Private Enterprises for Non-Oriented Silicon Steel in Recent Years (Unit: yuan/ton)

　　Data Source: Steel Union Data

　　From the trend of price differences between state-owned and private enterprises, the price gap of spot resources between them has widened. As of June 30, the average price difference between WISCO and Shagang was at least 370 yuan/ton and at most 600 yuan/ton, with an average price difference of 480 yuan/ton in the first half, expanding by 248 yuan/ton year-on-year. The average price difference trend over the past two years basically shows a process of first widening, then narrowing, and then widening again. According to market traders' feedback, market demand this year was poor, state-owned enterprise resource circulation orders were cautious, and traders ordered little, mostly for end-user stockpiling. State-owned enterprise resource spot prices remained relatively firm, while private enterprise resources circulated more. Under the increased expectation of price declines, traders mainly sold at low prices early on, resulting in more significant price fluctuations.

　　2. Raw Materials - High Costs of Silicon Steel Hot Rolls and Silicon Steel Cold Rolled Coils

　　In recent years, the trend of silicon steel hot rolling has generally been downward. According to survey data as of June, the ex-factory price of silicon steel hot rolls was 3383 yuan/ton, down 738 yuan/ton year-on-year. The average ex-factory price in the first half was 3614 yuan/ton, down 843 yuan/ton year-on-year. Feedback from most supplying enterprises indicates that silicon steel hot rolling usually adds about 300 yuan/ton compared to general hot rolling. Short-process silicon steel producers reported that raw material prices were generally high this year.

　　Figure 3: Comprehensive Price Trend of Domestic Non-Oriented Silicon Steel Hot Rolls 800 Grade (Unit: yuan/ton)

　　Data Source: Steel Union Data

　　3. Production Costs - Significant Profit Decline in Private Enterprises

　　From the cost-profit trend, domestic private silicon steel processing enterprises have shown a continuous profit decline in recent years. Survey and estimation data as of June show that the average production cost for domestic private enterprises was 4070 yuan/ton, down 751 yuan/ton year-on-year, with an average gross profit of -20 yuan/ton, down 348 yuan/ton year-on-year. Short-process silicon steel producers are basically at the breakeven point, whereas profits were maintained around 200 yuan/ton in the first half of last year. On one hand, since the first half of this year, due to high costs of silicon steel hot rolling and cold rolled coils, and gradual release of low and medium grade non-oriented silicon steel capacity, market competition has been fierce, and enterprises continuously lowered prices to secure orders. On the other hand, processing costs have increased significantly compared to last year. According to some purchasers of silicon steel cold rolled coils, processing costs per ton of steel have gradually risen from about 300 yuan to 400 yuan this year, with both raw material cold rolled coil and processing costs increasing, raising operating costs.

　　Figure 4: Cost and Profit Estimation of Short-Process Non-Oriented Silicon Steel Production (Unit: yuan/ton)

　　Data Source: Steel Union Data

　　4. Supply - Domestic Non-Oriented Silicon Steel Supply Increased by 2.5% in the First Half

　　According to Mysteel's survey of 29 production enterprises, from January to June, China's non-oriented silicon steel output totaled 6.6578 million tons, a year-on-year increase of 2.5%, with an average capacity utilization rate of 82%. Among them, high-grade output totaled 2.5222 million tons, accounting for 37.85% of non-oriented silicon steel. In July, actual non-oriented silicon steel output was 1.1224 million tons, a month-on-month increase of 35,100 tons. Currently, domestic non-oriented silicon steel supply continues to remain high.

　　Figure 5: National Non-Oriented Silicon Steel Production Situation (Unit: 10,000 tons)

　　Data Source: Steel Union Data

　　5. Inventory - Non-Oriented Silicon Steel Continues Slight Decline

　　Mysteel monitors inventory in 21 cities. In the last week of July, total social inventory of non-oriented silicon steel was 246,800 tons, a month-on-month increase of 10,000 tons; factory inventory was 136,600 tons, a month-on-month decrease of 800 tons. Total inventory was 383,400 tons, a month-on-month increase of 9,200 tons. From the social inventory trend, the peak accumulation was in mid-February this year, followed by continuous inventory reduction. According to market feedback, traders' sentiment this year is cautious, and compared to past years, overall inventory has decreased by about 20%.

　　Figure 6: Inventory Situation of Non-Oriented Silicon Steel in 21 Cities Nationwide (Unit: 10,000 tons)

　　Data Source: Steel Union Data

　　6. Import and Export - Significant Year-on-Year Growth in Oriented Silicon Steel Exports in the First Half

　　Customs data shows that in 2024, China's total silicon steel exports were 1.4472 million tons, and imports were 148,900 tons, with exports accounting for about 9% of China's total silicon steel supply. From January to June 2025, non-oriented silicon steel cumulative exports were 372,700 tons, down 2.5% year-on-year; oriented silicon steel cumulative exports were 393,200 tons, up 24.7% year-on-year. From January to June 2025, non-oriented silicon steel cumulative imports were 29,300 tons, down 31% year-on-year; oriented silicon steel cumulative imports were 47,100 tons, up 31.2% year-on-year.

　　The significant growth in oriented silicon steel exports in the first half of the year is mainly due to the following factors: First, market opportunities brought by global energy efficiency upgrades. Insufficient local manufacturing capacity in Europe and the US has led to a surge in demand for high-grade oriented silicon steel, creating favorable conditions for exports from China; China's high-grade oriented silicon steel (such as HiB steel) magnetic performance is close to international advanced levels, with obvious cost-performance advantages. Second, support from domestic policies and industrial upgrades. The "dual carbon" policy drives demand growth for ultra-high voltage transformers and new energy equipment, boosting exports of high-grade products; domestic substitution accelerates, with imports of oriented silicon steel decreasing from 237,400 tons in 2012 to 73,000 tons in 2024, and domestic capacity shifting to international markets. Finally, structural changes in supply and demand. This year, domestic oriented silicon steel capacity expansion and price competitiveness, coupled with relatively saturated domestic ultra-high voltage transmission and transformation station demand, have led to high supply pressure and foreign trade promoting demand release.

　　7. Downstream Demand Situation

　　1. Generator output increased by 63% year-on-year, domestic newly added cumulative installed capacity of wind turbines increased by 98.88% year-on-year, while wind turbine exports declined by 14.1% year-on-year. According to data from the National Bureau of Statistics, from January to June 2025, China's cumulative generator output was 139.445 million kilowatts, a 63% increase compared to the same period last year. According to the National Energy Administration, from January to June 2025, China's cumulative installed capacity of wind turbines was 51.39 million kilowatts, a 98.88% increase year-on-year. According to the General Administration of Customs, from January to June 2025, China exported a cumulative total of 24,309 wind turbines, a 14.1% decrease year-on-year.

　　Figure 7: Changes in Installed Capacity of Wind Turbines in China (Unit: 10,000 kilowatts, %)

　　Data Source: Steel Union Data

　　2. Production of washing machine motors and air conditioner motors both increased in the first half of the year. According to data from Industry Online, from January to June 2025, China's cumulative production of washing machine motors was 75.426 million units, a 5.81% increase year-on-year; air conditioner motor production was 293.05 million units, an 8.79% increase year-on-year.

　　Figure 8: Monthly Motor Production (Unit: 10,000 units)

　　Data Source: Steel Union Data

　　3. Significant increase in compressor production and sales. According to Industry Online data, from January to June 2025, China's cumulative production of rotary compressors was 167.665 million units, a 10.5% increase year-on-year; cumulative sales of rotary compressors were 170.028 million units, a 7.3% increase year-on-year.

　　4. Significant growth rate in new energy vehicle production. According to data from the China Association of Automobile Manufacturers, from January to June 2025, China's cumulative production of new energy vehicles was 6.9691 million units, a 40.9% increase year-on-year. According to Mysteel estimates, the new energy vehicle industry consumed about 140,000 tons of high-end non-oriented silicon steel in the first half of the year.

　　Figure 9: New Energy Vehicle Production and Silicon Steel Demand (Unit: 10,000 units, 10,000 tons)

　　Data Source: China Association of Automobile Manufacturers, Mysteel

　　5. The home appliance industry maintained steady growth in some areas in the first half of the year. According to the National Bureau of Statistics, in June 2025, China's air conditioner production was 28.383 million units, a 3.0% year-on-year increase; cumulative production from January to June was 163.296 million units, a 5.5% increase year-on-year. Refrigerator production in June was 9.047 million units, a 4.8% increase year-on-year; cumulative production from January to June was 50.642 million units, flat year-on-year. Washing machine production in June was 9.508 million units, a 16.5% increase year-on-year; cumulative production from January to June was 58.604 million units, a 10.3% increase year-on-year. Color TV production in June was 16.252 million units, an 11.1% decrease year-on-year; cumulative production from January to June was 91.871 million units, a 5.5% decrease year-on-year.

　　8. Market Outlook

　　Macro: In the second half of 2025, the global economy will continue to slow down, with trade policy becoming a key variable. Global GDP growth is expected to slow to 2.8%. The bulk commodity market shows a "weak demand + high supply" main theme. Oversupplied varieties are under pressure; ferrous metal commodities are constrained by a supply-strong and demand-weak pattern and will continue to decline, although with changes in China's domestic risk appetite and liquidity, the downward trend may occasionally slow or present structural rebound opportunities. China's economy shows short-term resilience, but the sustainability of export resilience is uncertain. China's fiscal focus is on "two new" (new energy and new infrastructure), but the offsetting effect on export decline may be limited. However, caution is needed against spillover from geopolitical conflicts and liquidity shocks from US debt maturities, which could increase commodity price volatility.

　　Supply: Domestic silicon steel supply may see significant growth in the second half of the year. Capacity from enterprises that started production in the first half will be further released, and many enterprises will add new production in the second half. Annual dynamic production of non-oriented silicon steel is expected to grow by about 10%.

　　Demand: During the "Golden September and Silver October" period, domestic silicon steel demand has further room for release. The three major white goods and automotive industries maintain steady production and sales growth; industrial motors perform poorly, and the growth space for silicon steel foreign trade is limited. In home appliances, the subsidy scope for trade-in has expanded from 8 to 12 categories, adding new categories such as water purifiers and dishwashers, with subsidy rates maintained at 15%-20% of the selling price. However, note that the remaining central subsidy funds of 138 billion yuan in the second half will be strictly limited, possibly causing adjustments in subsidy disbursement pace; high-end home appliance demand in fourth-tier cities grows by 25%, with significant three-generation simultaneous consumption characteristics, and smart home appliance penetration exceeds 40%. In the automotive sector, with continuous new model releases and technological innovation, the "reshuffle" in the new energy vehicle market will accelerate, and those who can accurately grasp user needs and maintain technological leadership will ultimately stand out.

　　Cost & Profit: Profits for major steel varieties may shrink somewhat in the early second half, mainly due to gradual increases in carbon and iron element costs in furnace materials, with silicon steel costs also having room to rise. For full-process silicon steel producers, profits will remain acceptable to some extent, while private small factories, constrained by high costs of raw material silicon steel hot rolling and hard rolling, may maintain slight fluctuations around breakeven in the second half or longer term.

　　Price: From the fundamentals, non-oriented silicon steel is expected to show a rise followed by a decline in the second half. Factors restricting domestic silicon steel prices include: first, the bearish point remains the persistent supply-demand imbalance of silicon steel, with continuous capacity expansion in recent years, small demand volume in the high-end industry, fierce competition in the mid-to-low-end industry, and limited growth in non-oriented silicon steel exports. Second, current market price fluctuations overly depend on futures market expectations, making spot prices hard to keep up, with a significant narrowing of the futures-spot spread, leading to periodic "priced but no market" situations. Finally, the bullish points include raw material cost support, current price levels being relatively low, and optimistic expectations for the traditional "Golden September and Silver October" peak season sentiment. Therefore, the domestic non-oriented silicon steel peak in the second half is expected to appear during "Golden September and Silver October," followed by a gradual decline.