Traditional Industries Ignite: Steel, Lithium & Glass Stocks Rally Amid Policy Shifts

• Multiple Chinese industrial sectors surged dramatically on July 2, 2025, led by steel (+120%), lithium and solar stocks
• Government policy shifts including elimination of outdated regulations and sector-wide production cuts drove momentum
• Steel demand strengthens amid property market recovery while lithium prices hint at market bottom formation
• Industry self-discipline replaces cutthroat competition as dominant theme post-policy shift
• Sustainability outlook varies by sector according to leading brokerages assessing post-rally potential

The Midday Explosion Rocking Markets

When Chongqing Iron & Steel shares spiked 120% just minutes into Hong Kong’s afternoon session on July 2, 2025, it detonated a wider sectoral explosion. Steel producers like Angang Steel (+30%) and Maanshan Iron & Steel (+20%) followed suit amid frenzied trading volume. Simultaneously on the mainland, the CSI Steel Index surged 4% with Chongqing Iron & Steel, Liuzhou Steel and Shougang Steel hitting daily 10% upside limits. The commodity futures market echoed this frenzy – polysilicon contracts hit the 6.99%涨停 limit at RMB35,050/ton while industrial silicon approached its ceiling at RMB8,285. Glass futures similarly surged 6% toward their daily limit as markets reacted to transformative government signals.

These moves weren’t isolated to steel. Lithium miners saw Tibet Mineral (+8%) lead gains as electric vehicle battery demand projections strengthened. Solar stocks ignited just as dramatically, with 20+ PV manufacturers including Daquan Energy and Trina Solar issuing announcements about facility upgrades after China lifted restrictions on production technology standards.

Policy Catalysts Driving Unprecedented Moves

Regulatory Overhaul at the Top

The overnight shift originated from Beijing’s July 1 high-level meeting directing “orderly exit of backward production capacity”. Hours later, China’s National Development and Reform Commission (NDRC) scrapped administrative policy documents covering:
– Steel industry clean production standards
– Nitrogen fertilizer efficiency metrics
– Electroplating environmental requirements

Industry Self-Discipline Takes Hold

Concurrently, China’s top five photovoltaic glass manufacturers agreed to unprecedented 30% collective production cuts starting July. China Glass Association records show this voluntary policy shift will reduce national PV glass output to 45GW – a 32% monthly reduction from Q2 averages.

The synergy between government mandate and corporate cooperation formed the critical turning point. What traders termed “involution-style competition” – endless price-cutting wars destroying industry profitability – now faces coordinated suppression through regulatory reform.

Sector-Specific Dynamics Under the Rally

Steel Riding Policy Tailwinds

China’s steel revival combines accelerating infrastructure approvals with constrained supply. According to Cinda Securities analysis:
– Daily hot metal production holds strong at 2.42 million tons
– Construction project funding ratios improved to 59.11%
– Beijing’s “rescued projects” program launched in July targets completion of 120,000 unfinished property developments

The brokerage recommends consolidation-focused firms: “The policy shift rewards enterprises actively restructuring regional capacity through M&A rather than incremental expansion”

Lithium Price Stability Signals

Ganfeng Lithium executives emphasized in their July 1 market update:
“Current lithium carbonate pricing reflects cyclical bottom formation. Demand has structurally increased even as prices declined 78% from 2023 peaks”

The battery metal producer outlined plans to boost low-cost brine project output while accelerating silicon anode adoption – technologies that bypass silver components and dramatically reduce production costs.

PV Glass Turning the Corner

Dongxing Securities identified two stabilizing pillars emerging:
– Technology-driven cost reduction eliminating unprofitable players
– Self-discipline protocols enforced through industry associations

Analyst Zhang Wei noted: “This policy shift requires formalizing unwritten rules. Key producers will soon sign binding agreements coordinating investment timelines and facility operating rates”

Historical Context and Sustainability Outlook

Experts immediately referenced China’s landmark 2016 Supply-Side Reform that sparked sustained sector rotations. CITIC Securities summarized similarities:

– Momentum initiation through abolition of obsolete regulations
– Industry consolidation accelerating within 90 days of major policy shift
– Initial speculative phases transitioning to institutional participation

Yet important differences exist:

Corporate profitability trails stock performance for now. As Dongxing Securities emphasized: “While Q1 saw glimmers of improvement, photovoltaic manufacturers remain collectively unprofitable. Sustained gains require further capacity consolidation alongside new efficiency breakthroughs”

Investor Strategies Moving Forward

Post-surge positioning requires differentiation:

1. Steel offers near-term conviction – Accelerating starts on 6.5 million “national project” housing units underpins demand
2. Lithium presents asymmetric opportunity – Bottoming signals mixed with projected battery metal supply deficits from 2027
3. Solar requires selective patience – Prioritize equipment suppliers benefiting from facility upgrades over pure module makers

Execution guidance:
– Monitor NDRC Capacity Utilization weekly reports
– Track provincial Steel Association production volume compliance
– Follow China Nonferrous Metals Association lithium price indices

Market historian Cao Ming of Shanghai Securities cautioned against chasing momentum: “True value emerges post-correction. These sectors shared 78% correlation during initial rebounds – but will rapidly diverge based on policy implementation efficiency”

The critical post-policy shift phase relies entirely on speed: Industries demonstrating aggressive facility shutdowns and swift adoption of unified industry standards appear positioned to convert paper valuations into durable gains.

For traders initiating positions, consider phased entry starting mid-July. Minimum holding periods should span policy implementation deadlines in September when backsliding risks become visible. Though overarching government commitment provides tailwinds, transitional industries remain vulnerable to execution gaps.

The coordinated policy shift marks China’s pivot toward mature industry governance structures. Success requires maintaining coherence between Beijing’s macroeconomic controls and local producers adopting self-discipline mechanisms pioneered during this historic market response.