In 2025, China steel industry is confronted with a series of complex and multi-dimensional challenges, which include not only structural contradictions within the industry but also uncertainties in the external economic environment and policies.
1. Insufficient growth momentum on the demand side and structural transformation pressure
(1). Traditional demand shrinks
The downturn in the real estate industry: With the continuous increase in China’s urbanization rate and the acceleration of population aging, the new construction area of the real estate sector has been continuously declining, putting pressure on the demand for construction steel such as rebar and wire rods.
Infrastructure investment slows down: Local government debt constraints are strengthened, the increment of traditional projects is limited, and the growth rate of steel demand for infrastructure may drop to 2%-3%.
(2). The impact of manufacturing upgrading
The substitution effect of new energy: The trend of lightweighting in new energy vehicles and the transformation of materials for wind and solar power equipment may lead to the growth of demand for some panels falling short of expectations.
The risk of industrial chain relocation: The rise of manufacturing in Southeast Asia, Mexico and other regions has led to the transfer of some mid-to-low-end steel processing links, and the indirect demand for exports is facing the pressure of diversion.
2. The dual challenges of overcapacity on the supply side and green transformation
(1). Global overcapacity has intensified
China’s crude steel production capacity still exceeds 1.1 billion tons. Coupled with the release of new capacity in India and Southeast Asia, the risk of global supply and demand imbalance is on the rise, and the steel price center may systematically shift downward.
(2). The cost of green transformation is high
Internalization of carbon costs: As China’s carbon market expands to the steel industry, the carbon emission cost per ton of steel increases, and the proportion of short-process electric furnace steel needs to be significantly raised. However, the shortage of scrap steel resources restricts the progress of transformation.
Technology substitution risk: The commercialization process of low-carbon technologies such as hydrogen metallurgy and CCUS (carbon Capture) falls short of expectations, and enterprises may face the predicament of “high investment and low return”.
3. Cost side resource constraints and price fluctuation risks of China steel industry
(1). Competition for the pricing power of iron ore
China’s dependence on imported iron ore still exceeds 80%, and the monopoly pattern of the four major mines remains unchanged. If geopolitical conflicts escalate, the volatility of iron ore prices may intensify.
(2). Impact of Energy structure transformation
The supply of coking coal has been affected by environmental protection production restrictions, increasing the reliance on imports. Coupled with the EU carbon tariff (CBAM) indirectly pushing up the cost of seaborne coking coal, the profit margins of long-process steel mills have been squeezed.
4. Policies and Risks in the International Trade environment
(1). Domestic policy regulation has been intensified
Tightening of capacity replacement: The steel industry is facing stricter total capacity control, and some enterprises that have not completed ultra-low emission transformation may be forced to exit.
Financial policy constraints: The green credit standards are becoming stricter, the financing costs of high-carbon steel enterprises are rising, and the cash flow pressure is sharply increasing.
(2). Escalation of international trade barriers
Carbon barrier impact: With the official implementation of the EU’s CBAM, the hidden costs of China’s steel exports have increased.
The generalization of anti-dumping investigations: The trade restrictions imposed by the United States, India and other countries on Chinese steel may be expanded to high value-added varieties such as galvanized sheets and electrical steel.
(3). Fluctuations in exchange rates and interest rates
If the Fed’s interest rate hike cycle continues, the strengthening of the US dollar will suppress commodity prices, while fluctuations in the RMB exchange rate may erode the export profits of steel enterprises.
5. Risks of technological innovation and industrial ecosystem reconstruction
(1). Disruptive breakthroughs in materials technology
The application of new composite materials and 3D printing technology in the fields of construction and automobiles is accelerating, posing a threat of substitution to traditional china steel industry.
(2). Digital Supply Chain Impact
Industrial Internet platforms have restructured the circulation links, compressing the profit margins of traditional traders and accelerating the industry reshuffle.
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