Article No. 2267: Financial Empowerment of Product Structure Upgrading

Against the backdrop where product structure determines profitability, an optimized product mix is key to enhancing gross margins. Increasing the share of high-value-added, high-tech, and market-recognized products effectively lifts overall gross margin and strengthens earnings stability; conversely, excessive low-margin, low-efficiency products drag down aggregate profitability and waste resources and production capacity. Optimizing product structure requires focusing on high-end, differentiated, and specialized offerings—phasing out inefficient products and concentrating resources on strengthening competitive advantages. This enables tiered product portfolios and maximizes profitability. Only through continuous structural adjustment—pushing products toward higher-margin segments—can enterprises enhance core competitiveness and secure a solid foundation for sustainable development. China is the world’s largest steel producer, yet Japan Iron and Steel (JFE) ranks first globally in terms of optimal product structure, followed by POSCO and ArcelorMittal. JFE leads the pack. Core features: Specialty steel accounts for over 20% of output, with flagship products including grain-oriented electrical steel, ultra-high-strength automotive steel, and ultra-thin electrical steel (0.015 mm “tearable steel”). These command prices 10–100 times higher than conventional steel and involve extremely high technological barriers. Profitability: In FY2021, JFE posted profits of ¥840.9 billion; gross margins on premium products routinely exceed 30%. With only one-quarter of China’s steel output volume, JFE achieved superior profitability. POSCO ranks second. Core features: Focus on high-end automotive steel—POSZET® gigasteel (ultra-high-strength automotive steel plus proprietary welding technologies) epitomizes its premium product portfolio. Steel for new energy and automotive applications constitutes a notably high share. Profitability: Gross margins on premium products exceed 25%; per-ton profitability leads Asia. ArcelorMittal ranks third. Core features: Global presence in high-end automotive sheet and construction machinery steel; self-owned iron ore share exceeds 40%; average selling price exceeds USD 800/ton. Profitability: H1 2025 net profit reached USD 2.598 billion; EBITDA per ton of steel stood at USD 125. Finance functions must proactively support the implementation of product-structure-upgrading strategies across four dimensions—cost accounting, safeguarding operations, empowerment, and decision-making—to become a core enabler of strategic execution.

2026 Global and Chinese Steel Industry Development Research Report | 'Houses Aren’t Selling—Neither Are Steel Products': China’s Steel Industry at a Historic Turning Point After Thirty Years

Falling scrap steel and electricity costs, coupled with rising shares of high-margin products—elasticity in the specialty steel segment is emerging first at the bottom of the cycle. Liuzhou Iron and Steel Co., Ltd. saw its gross margin rise from −1.55% in 2022 to 5.22% in 2025. Logistics cost advantages at the Fangchenggang coastal base are materializing, significantly boosting shares of cold-rolled and heavy plate products. Revenue from cold-rolled/galvanized steel coils increased from RMB 8.36 billion to RMB 12.60 billion—a 50.7% increase. The ‘dual transformation’—from inland to coastal locations, and from construction-grade steel to industrial-grade materials—is delivering tangible results. Enterprises Under Pressure Ansteel Co., Ltd. recorded revenue of RMB 96.052 billion in 2025, representing a cumulative decline of 26.7% over four years. Its profit line has been in deficit for four consecutive years, hitting a nadir of RMB −6.953 billion in 2024; losses narrowed to RMB −3.897 billion in 2025. Steel business gross margin turned negative in 2023, deteriorated further to −3.58% in 2024, and remained negative in 2025 (−1.28%). Revenue from all three major product lines—cold-rolled, hot-rolled, and medium-thick plates—shrank markedly, with medium-thick plates plunging 34.7%. Overreliance on commodity-grade products, limited regional market size, and a mere 7.5% export share—lacking overseas buffers—means enterprises lacking premium products and international channels bear the heaviest pressure amid industry downturns. Hebei Iron and Steel Group Co., Ltd. reported revenue of RMB 118.1 billion in 2025, down 17.7% cumulatively. Yet its steel business gross margin rose from 9.49% in 2022 to 10.69% in 2025. Plate share climbed from 65.6% to 73.6%, while revenue from bars and structural steel fell 43.4%, and wire rod revenue dropped 56.0%. Its product restructuring direction is clear—concentrating on plates and cutting low-end long products—but export share remains extremely low (1.7%–2.6%), indicating excessive dependence on the domestic market. Global Benchmarks ArcelorMittal’s 2025 sales revenue totaled USD 61.352 billion, down 23.2% from its 2022 peak. Gross margin declined from a peak of 25.1% in 2021 to 7.1% in 2025. Soaring European energy costs and falling global steel prices are primary drivers. However, mining product revenue rebounded 26.9% to USD 1.51 billion in 2025, and iron ore output surged from 42.4 million tons to 48.8 million tons—mining operations now serve as a profit buffer for its core steel business. Japan Iron and Steel (JFE) surpassed JPY 10 trillion (JPY 10.0632 trillion) in 2025 revenue, marking a 47.8% five-year cumulative growth. Iron and steel business revenue reached JPY 9.1732 trillion, up 17.3% year-on-year. Crude steel output rose from 39.64 million tons to 50.48 million tons, driven mainly by newly consolidated overseas acquisition capacities. Geographically, domestic Japanese market share fell below 50% for the first time—to 48.3%—while the ‘Other Regions’ share jumped from 17.4% to 33.3%. Globalized capacity allocation is replacing the traditional model of ‘Made in Japan, Sold Globally.’ Nucor Corporation’s 2025 sales revenue rebounded to USD 32.494 billion, up 5.7% year-on-year. Steel mill revenue rose 6.8% to USD 20.003 billion—the main engine driving the company’s overall recovery. Thin plate, structural steel, and medium-thick plate segments all posted notable recoveries in 2025.

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ArcelorMittal shares are recommended to hold due to strong Q1 earnings and record iron ore shipments. Despite challenges in the Chinese steel market, strategic investments in high-value products and decarbonization support long-term growth.

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