Reshape the steel supply and demand market and accelerate the exit from the deep adjustment period

2025 marks the final year of the "14th Five-Year Plan" and a crucial year for the steel industry to navigate its way out of a "deep adjustment period" amid "high costs, low profits, high environmental pressure, and low efficiency". However, multiple challenges persist, including declining demand, overcapacity, environmental pressures, and international trade frictions.

Recently, based on the analysis of market supply and demand data from the first quarter and fluctuations in raw material prices, it is evident that the steel supply and demand market is undergoing an accelerated adjustment in 2025. In response to market changes and the final year's tasks, senior executives from multiple steel companies have offered suggestions on how the industry can navigate this deep adjustment period.

Supply and Demand Trends: Improved Demand, Upgraded Supply

As a cyclical industry, the steel industry still faces prominent supply and demand contradictions in 2025, but some new changes have emerged under the influence of market and policy drivers.

Affected by the deep adjustment of the real estate industry, steel demand has been declining year by year. In stark contrast, steel demand from the manufacturing industry has shown strong growth, becoming one of the two major pillars alongside construction steel. Public data shows that the proportion of steel used in manufacturing has risen from 42% in 2020 to 50% in 2024.

Meanwhile, driven by the "two new" policies, steel consumption in the manufacturing industry is expected to continue growing in 2025. According to calculations by the Metallurgical Industry Planning and Research Institute, the "two new" policies are expected to boost steel consumption by an average of 12 million tons annually.

In addition, the "two sessions" report mentioned for the first time the need to build good houses to meet the public's demand for high-quality housing, thus bringing new development opportunities for steel structures and material substitution. Recently, Hu Yukou, executive vice president of the China Construction Metal Structure Association's Architectural Steel Structure Branch and secretary general of the Steel Structure Branch of the Ministry of Housing and Urban-Rural Development's Prefabricated Building Industry Technology Innovation Alliance, also pointed out at the "Lange Steel Network 2025 Beijing-Tianjin-Hebei High-end Steel Product Industrial Chain Development Forum" that the current market demand for steel structures is close to 100 million tons. He also pointed out that in the next 5 years, overseas engineering contracting is expected to reach a scale of 2-2.5 trillion yuan annually, compensating for the domestic construction capacity gap.

Regarding exports, despite challenges in the global trade environment, such as the impact of "reciprocal tariff" policies and an increase in anti-dumping investigations worldwide, China's steel exports remained high in the first quarter of 2025, demonstrating strong momentum. According to the General Administration of Customs, in the first quarter of 2025, national steel exports increased by 6.3% year-on-year, with a 5.7% year-on-year increase in March, a significant increase.

Changes in demand have forced the supply side to accelerate its adjustments, entering a new stage of "reducing quantity and improving quality" development. To promote high-quality development in the industry, the Ministry of Industry and Information Technology issued the "Steel Industry Specification (2025 Edition)" in February this year, accelerating the pace of transformation and upgrading.

Data shows that corporate profits are gradually improving, with the operating costs of key steel enterprises decreasing by 9.6% year-on-year, and the average sales profit margin of steel products increasing by 0.67 percentage points year-on-year. The structure of steel products continues to optimize. In the first quarter, the output of construction steel bars was 48.11 million tons, down 2.9%; the output of extra-thick plates, medium plates, coated plates, and plated plates used in manufacturing all increased by more than 10% year-on-year, with a total output of 38.84 million tons; and the output of crude steel remained basically stable, with a national crude steel output of 259 million tons, a slight increase of 0.6% year-on-year.

It is worth noting that in terms of costs, raw material prices have been continuously falling since the beginning of this year. Han Weidong, a senior expert at Lange Steel Network and senior consultant of Tianjin Youfa Steel Pipe Group Co., Ltd., pointed out that this year is the turning point year for raw materials, with prices of coke and iron ore falling sharply, and some varieties have fallen below the cost price. It is expected that after raw material prices bottom out, steel prices will also hit a low point.

Overall, although the steel industry is currently facing short-term supply and demand contradictions, the industry's resilience is evident under the influence of multiple factors. On the demand side, under the combined effects of the stabilization of the real estate market, efforts in infrastructure investment, upgrading of the manufacturing industry, and high-level export support, overall demand is expected to remain stable or even marginally improve. On the supply side, the counteracting effect of production capacity control and increased industrial concentration, coupled with the growth in high-value-added demand for high-end steel in energy and equipment sectors, is gradually building a "stable and high-quality" development pattern for the steel industry.

Suggestions: Accelerating the Exit from the Deep Adjustment Period and Exploring New Growth Drivers

2025 is a crucial year for the steel industry to accelerate its exit from the "deep adjustment period," and last year's Central Economic Work Conference provided strong guidance and policy support for the industry's adjustment.

To contribute the steel industry's strength to the comprehensive completion of the "14th Five-Year Plan" economic and social development goals and tasks, steel enterprises should seize policy opportunities, strengthen self-discipline, break the "involution," promote innovation, transformation, and industrial upgrading, comprehensively improve resource allocation efficiency, and accelerate the steel industry's exit from the "deep adjustment period".

To this end, senior executives from many steel companies have voiced their opinions and suggestions, jointly exploring how to promote the high-quality development of the steel industry and quickly exit the deep adjustment period under the complex domestic and international environment.

Jiang Wei, deputy secretary of the Party Committee, vice president, and secretary general of the China Iron and Steel Industry Association, believes that the imbalance between supply and demand is the main contradiction currently affecting the industry's development. He suggested that we should effectively close the entrance to new steel production capacity, speed up the channels for the exit of backward production capacity, and adhere to technological innovation and green, low-carbon transformation.

Zhao Minge, secretary of the Party Committee and chairman of Shougang Group, analyzed that in 2025, the steel industry should fully utilize tools such as artificial intelligence, digital technology, and green technology for empowerment and transformation, accelerate the transformation and upgrading of traditional industries, and also deeply explore the potential demand of emerging and future industries and make early arrangements to seize structural development opportunities.

He Tianren, secretary of the Party Committee and chairman of Sangang Group, believes that it is necessary for the steel industry to introduce mandatory administrative production reduction policies in 2025 to accelerate the elimination of non-compliant production capacity. If steel production is reduced by about 5%, the industry's profitability is expected to improve significantly.

Liu Guoqi, vice chairman of Delong Steel, suggested that steel enterprises should have the awareness of "if you cannot change the market, change yourself" and actively break the industry's involution. Enterprises can extend the steel industry chain, develop diversified products, such as steel structures, advanced material substitution, bridge applications, and steel for new energy, which will bring new opportunities for the steel industry.