Steel demand may show a pattern of "strong domestic, weak foreign" this year.

National statistics show that as various macroeconomic policies continue to take effect, key indicators related to the national economy and steel demand have started well, continuing an upward trend. Looking ahead at the steel market situation this year, due to Trump's high tariffs disrupting the world economic order, and the impact of the national decision-making department strengthening counter-cyclical and cross-cyclical adjustments, it is expected that national steel demand will show a strong domestic and weak foreign market. At the same time, more domestic steel capacity will be released, continuing to put heavy pressure on the steel market.
    

I. Industrial production has accelerated significantly, and steel-consuming industries such as equipment manufacturing have grown rapidly.

In the first quarter of this year, the national added value of industries above designated size increased by 6.5% year-on-year, 0.7 percentage points faster than the whole year of last year; among them, the added value of industries above designated size in March increased by 7.7% year-on-year, 1.8 percentage points faster than in January-February this year, and 3.2 percentage points faster than the same period last year. Among industrial production, equipment manufacturing and high-tech manufacturing, which consume the most steel, grew rapidly, with equipment manufacturing and high-tech manufacturing growing by 6.3% and 8.5% year-on-year, respectively, 4.6 and 2.4 percentage points faster than all industries above designated size. Among major steel-consuming products, the national automobile output in the first quarter was 7.51 million vehicles, a year-on-year increase of 12%, and the output of engineering machinery, power generation equipment, robots, and shipbuilding completion also increased significantly, showing that the national manufacturing industry's steel demand continues to be strong this year.

Judging from its leading indicators, the China Manufacturing Purchasing Managers' Index (PMI) in March 2025 was 50.5%, an increase of 0.3 percentage points from the previous month. Among the 13 sub-indexes, compared with the previous month, the production index, new orders index, new export orders index, and raw material inventory index increased, with the index rising by 0.1-0.7 percentage points. Affected by this, it is expected that the manufacturing industry will continue to grow rapidly in the first half of this year and even throughout the year, continuing to generate strong demand for steel.

II. Fixed asset investment growth accelerated.

In the first quarter of 2025, national fixed asset investment (excluding rural households) increased by 4.2% year-on-year, 0.1 percentage points faster than in January-February; among them, private fixed asset investment increased by 0.4% year-on-year, and the growth rate accelerated by 0.4 percentage points; month-on-month, fixed asset investment (excluding rural households) in March increased by 0.15%. From the perspective of investment areas, in the first quarter, national infrastructure investment increased by 5.8% year-on-year, manufacturing investment increased by 9.1%, and real estate development investment decreased by 9.9%; excluding real estate development investment, national fixed asset investment increased by 8.3%.

Fixed asset investment has always been an important component of China's total steel demand. Although it was dragged down by the decline in real estate development investment, it did not change the overall acceleration and stable growth trend of fixed asset investment. This shows that in the "three carriages" of China's total steel demand in the first quarter of this year, fixed asset investment remains a strong engine.

It is worth noting that although the national real estate market situation in the first quarter of this year is still in the process of adjustment, there has also been a significant improvement. The data released by the National Bureau of Statistics shows that in March 2025, the activity of the housing market increased, and the number of cities where the sales prices of commercial residential houses increased month-on-month increased among 70 large and medium-sized cities; the sales prices of commercial residential houses in first-tier cities increased month-on-month, and the overall month-on-month decline in second- and third-tier cities narrowed; the year-on-year decline in all cities continued to narrow. Data from the China Index Academy's market monitoring also shows that since the beginning of this year, national housing sales have clearly warmed up, with new home sales area in the key 100 cities showing a small year-on-year increase in March, and the transaction volume of second-hand houses in the key 20 cities increasing by about 30% year-on-year. This shows that the worst period of the national real estate market has passed, and the decrease in housing purchase costs and the relaxation of housing purchase policies are the main factors contributing to the warming up of housing sales. As various optimization policies continue to take effect and incremental policies are introduced, especially the continued decline in housing loan interest rates and the greater力度取消限购 nationwide, will create a better foundation for the healthy development of the national real estate market, and the situation of the national real estate market stabilizing will be further enhanced, and the drag on total steel demand will inevitably further weaken.

III. Steel exports maintain a large volume.

According to the General Administration of Customs, in the first quarter of 2025, the country exported 27.429 million tons of steel, a year-on-year increase of 6.3%; among them, 10.456 million tons of steel were exported in March, a year-on-year increase of 5.7%, maintaining a large volume. During the same period, the import and export of electromechanical products grew rapidly, with China's import and export of electromechanical products reaching 5.29 trillion yuan, an increase of 7.7%. The export growth rate of some major steel-consuming products was significantly higher than the average growth rate of goods exports, such as household appliances, new energy vehicles, ships and marine engineering equipment, and machinery.

IV. More steel capacity has been released, creating heavy pressure on the market.

While the overall indicators related to total steel demand are improving, steel companies are also actively increasing production. According to statistics, in the first quarter of 2025, the national crude steel output was 259.33 million tons, a year-on-year increase of 0.6%, of which the crude steel output in March was 92.84 million tons, a year-on-year increase of 4.6%; the national steel output in the first quarter was 358.74 million tons, a year-on-year increase of 6.1%; among them, the steel output in March was 134.42 million tons, a year-on-year increase of 8.3%, both showing a significant acceleration, thus becoming a heavy pressure on the steel market.

Looking ahead at the steel market situation, on the one hand, Trump's high-tariff trade protectionism has caused great disturbances to the world economic order, and will inevitably have a great impact on China's steel export demand; on the other hand, the national decision-making department has correspondingly strengthened the intensity of counter-cyclical and cross-cyclical adjustments, stimulating China's potential as a "world supermarket", and will also expand domestic demand to make up for the weakened external demand gap, thus forming the characteristics of "strong domestic and weak foreign" steel demand this year, while the greater release of domestic steel capacity continues to put heavy pressure on the steel market. (Original article by Lange expert Chen Kexin, please indicate the source when reprinting)