News Room - Steel Industry

Posted on 10 Jul 2025

China's steel market faces demand headwinds, price pressure in H2

China's steel market is expected to remain under pressure during the present July-September half of the year, weighed down by sluggish domestic demand, rising export challenges, and persistent supply-side constraints. While supportive policies and potential production curbs may offer short-term relief, any sustained market rebound will hinge on a recovery in actual demand, warns Mysteel's latest forecast for H2.

Steel demand to dip amid property slump and slower manufacturing

Domestic steel demand is expected to decline during this half, weakened by the country's moribund property market and slower manufacturing growth.

China's real estate sector remains under significant pressure. According to the China Real Estate Association, as of May the total inventory of unsold commercial housing across China had reached a level equivalent to 48.7 months of supply, meaning it would take more than four years to sell off the current stock at the current sales pace. This is far above the generally accepted healthy level of 18 months, highlighting a severe oversupply in the market and mounting more pressure on the property sector.

In 2024, China's new construction starts by floor area totaled 738.9 million sq m, slumping by 23% on year, according to the country's National Bureau of Statistics.

While infrastructure investment may cushion the fall in demand, it is unlikely to reverse the broader downtrend. As of June 20, only 38% of the Yuan 4.4 trillion ($612.7 billion) special-purpose local government bond quota had been issued. The pace of issuance is expected to accelerate this half, supporting marginal growth in infrastructure-related steel demand.

Steel demand from manufacturing is also likely to soften between now and end-December. Although auto production and sales rose by 12.7% and 10.9% respectively in January-May, rising global tariffs and policy uncertainty could dampen growth in H2. Similarly, the growth momentum in the home appliance sector is expected to slow and appliance makers may need to rely heavily on consumption stimulus measures like trade-in programs to generate sales.

On the other hand, shipbuilding and machinery are expected to remain bright spots. A healthy backlog of ship orders and policy-driven upgrades in equipment manufacturing will continue to support steel demand in these sectors.

Overall, China's apparent crude steel consumption during 2025 is forecast to slide by 0.6% on year.

Exports facing greater global headwinds

China's steel exports are forecast to shrink by 5 million tonnes in H2 from the same period last year, with full-year exports projected at 110.6 million tonnes, slightly lower by 460,000 tonnes on year.

Global headwinds including subdued manufacturing activity (with the global PMI at just 49.6% in May) and ongoing trade friction are expected to limit export opportunities. Moreover, aggressive frontloading of steel exports in early 2025 to beat potential tariffs has likely pulled forward demand, setting the stage for a slowdown starting from September, according to the report.

Production cuts likely

After a strong H1, when crude steel output was seen increasing by 9.28 million tonnes on year, production in H2 is expected to decline by 8-10 million tonnes, due to stricter environmental protection regulations, decarbonization targets, and output control policies, Mysteel suggests.

The third quarter is seen as a key window for output restrictions, especially with grand national events such as the September 3 military parade in Beijing likely to trigger tighter production curbs in the Beijing-Tianjin-Hebei region. If enforced, annual crude steel output may remain flat compared with 2024, according to Mysteel's projection.

China's total crude steel output for 2024 posted an on-year fall of 1.7% to reach 1.005 billion tonnes, the NBS data showed.

Prices under pressure as supply-demand imbalance persists

China's domestic steel prices are forecast to continue trending lower in H2 amid the ongoing supply-demand imbalance. During July-December, Mysteel's composite steel price index is forecast to fall to Yuan 3,360/t on average, down 7.5% on year.

The full-year average of this index is seen at Yuan 3,435/t which, if realized, would make for a 10.5% drop from the 2024 average.

At the same time, raw material costs are expected to ease further in H2, and softer input costs will continue to weigh on steel prices. Mysteel SEADEX 62% Australian Fines, for example, will likely average $87/dmt CFR Qingdao during H2, with the full-year average at $95/dmt, representing a 12.8% on-year decline.

Source:Mysteel Global