Posted on 29 Apr 2025
A wide consensus on production cuts has been reached within China's steel industry in response to mounting challenges it now faces both at home and abroad, so translating this agreement into coordinatedaction becomes an urgent priority for Chinese steelmakers, according to a release from the China Iron and Steel Association (CISA).
Speaking at an industry conference on April 25, Luo Tiejun, Vice Chairman of the CISA, stated that China's steel industry continues to be the most competitive in the world, with its products maintaining advantages in global markets.
However, the domestic steel industry is currently operating under severe pressure because of a persistent market downturn and contraction in downstream steel demand, he pointed out.
China's steelmakers have been struggling with thin profit margins overall so far this year, as domestic steel prices kept rangebound through the first quarter and posted clear declines in April when the United States initiated sweeping tariff hikes.
On the cost side, price trends for steelmaking raw materials diverged, with iron ore hovering relatively high at around $100/t this year, while coking coal and coke witnessed notable falls in the first quarter.
China's crude steel output has peaked
China's total crude steel production has already peaked, though the trends varied from different steel items. For example, over 2020-2024, the production of rebar and wire rod slumped by approximately 100 million tonnes, while the production of hot-rolled coil (HRC) jumped by about 95 million tonnes, and that of electrical steel increased by 5.7 million tonnes.
Nonetheless, domestic demand will continue to support China's steel production at a high plateau over a longer period of time. Luo projected that the country's crude steel output could range between 800 million and 900 million tonnes by 2035, before stabilizing around 800 million tonnes after 2050.
Negative demand growth coexists with structural optimization
China's steel industry has entered a phase of existing capacity optimization, Luo reiterated. Steel demand in China has contracted as a whole after the country's real estate industry fell off its peak and infrastructure investment slowed its pace.
In the first three months of this year, China's apparent consumption of crude steel totaled 230 million tonnes, lower by 1.3% from the same period last year, while crude steel output increased by 0.6% on year to 259 million tonnes, Luo stated, citing data from the National Bureau of Statistics (NBS).
With the manufacturing sector emerging as a new growth driver, overall steel demand in China could stay at elevated levels in the coming years. Luo expressed confidence that China would remain the world's largest steel consumer over the long term.
Steel exports face rising trade barriers
In the first quarter, China's steel exports were marked by higher volumes but lower prices, while growing international trade frictions have made the export environment increasingly complex, Luo warned.
Over January-March, China's finished steel exports totaled 27.43 million tonnes, rising by 6.3% on year, while the export value slipped by 3.8% on year to Yuan 139 billion, according to the latest statistics from the country's General Administration of Customs (GACC) released on April 14.
Besides, the structure of Chinese steel exports also shifted in response to the volatile trade environment this year, with long steel products' share declining and that of flats growing. By destination, steel products exported to Europe and America decreased, while shipments to Asia, Africa and Latin America expanded.
Although the U.S. has announced prohibitively high tariffs on Chinese goods, the impact on direct steel exports to the country is expected to be minimal due to the low export volume. However, steel exports to other countries such as Vietnam, South Korea, Brazil and Mexico may decline with the U.S. tariffs on these countries.
In addition, China's indirect steel exports to the U.S. would be more exposed to the tariffs, with its exports of steel-intensive products such as machinery, metal goods, containers, and home appliances to the U.S. facing challenges amid deteriorating trade conditions.
Future directions for China's steel industry
Luo emphasized the need to strictly control new steel capacity additions. Green and low-carbon development aligns with the high-quality development goals in China's steel industry, he said, noting that the steel industry has been incorporated into the country's national carbon emission trading scheme (ETS) in late March.
Industry analysis finds that contributions to carbon emission reductions in the steel industry should come from crude steel output cuts (41%), raw material structure optimization (4%), process structure optimization (36%), and low-carbon technology application (17%).
In this regard, Luo suggested compiling detailed data on steel mills' smelting facilities, replacing output or capacity quotas with carbon emission controls, accelerating mergers and reorganizations, and taking measures to phase out inefficient steel capacity.
To stabilize markets in major steel hubs, Luo urged Chinese steel producers to proactively manage their production, particularly calling on large steel mills in the regions to take the lead.
As for steel exports, the proper guidance is crucial. In late March, five Chinese government departments - the State Taxation Administration, the Ministry of Finance, the Ministry of Commerce, the General Administration of Customs, and the State Administration for Market Regulation - jointly issued an announcement aimed at regulating the order of steel exports.
Exports of high value-added steel products should be prioritized, Luo stressed, adding that reasonable steel exports can not only track global advanced manufacturing technologies but also fulfill international demand.
Source:Mysteel Global
