China’s Steel Industry Faces Softening Outlook
China’s steel industry, the world’s largest producer of the key industrial metal, is exhibiting signs of softening yet displaying remarkable resilience in the face of mounting economic pressures. As the global economic landscape continues to evolve, China’s steel sector finds itself at a crossroads, caught between the persistent effects of the COVID-19 pandemic and the challenges of a changing geopolitical and domestic environment.
Since peaking at 1.065 billion metric tons in 2020, China’s steel production has been on a steady decline, with output expected to hit around 1.005 billion tons by 2024. This marks a significant decrease, yet it’s important to note that production levels have remained within a 70-million-ton range since 2019, highlighting a certain degree of stability despite external pressures. The reduction in output is a clear indicator of the sector’s response to broader economic slowdowns, particularly the ongoing struggles within China’s real estate sector. While some may view this decline as a symptom of weakness, a closer analysis reveals the industry’s resilience. Even amidst sluggish economic growth, China’s steel production has held steady at relatively high levels over the last five years.
Looking ahead to 2025, the trajectory of the steel industry is shrouded in uncertainty. Several critical factors will play a role in shaping the future. First, the evolving trade landscape, particularly with the United States, could have profound implications for China’s steel exports. New tariffs under President Trump’s administration could disrupt global supply chains and dampen China’s competitive edge. Moreover, the recovery of China’s residential property sector will be pivotal. If construction activity picks up and demand for steel surges, the sector may find itself on a firmer footing. Conversely, if property developers remain mired in financial difficulties, domestic steel consumption may continue to stagnate.
A key factor that will influence the industry in the coming year is China’s steel export strategy. With exports reaching a nine-year high of 110.72 million tons in 2024, an increase of 22.7 percent year-on-year, China’s steel mills have managed to offset some of the losses in domestic consumption. However, with countries like India ramping up their own steel production, China may face greater challenges in maintaining export growth. Notably, certain countries with limited domestic steel production will continue to rely on China for their steel imports. In an optimistic scenario, if global trade tariffs remain manageable and the domestic economy stabilises, China’s steel production could hover around 1 billion tons in 2025. This would likely ensure steady demand for iron ore, though the record-high imports of 2024 may not be replicated. Stockpiles are unlikely to surge again, which could limit the growth of iron ore imports, unless a significant dip in prices entices traders to replenish stock.
