Posted on 21 May 2026
China's latest move to tighten steel capacity swap rules serves as an important policy directive aimed at reshaping the country's steel capacity structure, competitive landscape, and development pathway, Mysteel's new analysis report noted.
The revised rules, issued by the Ministry of Industry and Information Technology (MIIT) on May 18, as Mysteel Global reported, aim to promote structural upgrading of steel capacity by unifying capacity replacement ratios, tightening capacity trading, strictly curbing long-idled capacity, encouraging low-carbon transformation, and strengthening regulatory oversight.
By setting a nationally unified yet differentiated capacity replacement ratio, the guidelines seek to reinforce capacity control, encourage mergers and acquisitions, and support green and high-end development in the steel industry, according to Mysteel's report.
Specifically, the capped crude steel capacity under a nationwide replacement ratio of no less than 1.5:1 is expected to tighten supply-demand fundamentals in China's steel industry, providing support for steel prices, sustaining steelmakers' profitability, and curbing disorderly price competition.
The preferential 1.25:1 ratio for mergers and acquisitions, combined with restrictions on capacity trading after a two-year transition period, is expected to steer leading firms' expansion toward acquiring smaller steelmakers that face higher compliance costs under the new policy. This is likely to deepen capacity integration and improve the industrial structure.
Furthermore, the guidance applies a 1:1 replacement ratio to projects upgrading steelmaking capacity with green and high-end technologies, such as electric arc furnaces and hydrogen-based metallurgy, as well as special steel projects using qualified electric arc furnaces. This will help increase the share of short-process steelmaking capacity, supporting China's carbon peak and carbon neutrality goals, the report noted.
Overall, the revised capacity swap rules mark a deepening phase of supply-side structural reform in the Chinese steel industry.
In the short term, the steel sector is expected to see rising green investment and a wave of mergers and acquisitions. Over the longer term, it is likely to evolve into a more controlled, better-structured, low-carbon industry led by major players, Mysteel's report concluded.
Source:Mysteel Global
