2025-06-09
Three Uncertainties in the Chinese Steel Market
Overall analysis: Three major uncertainties currently exist in China's steel market, putting pressure on market prices.
The first uncertainty is the uncertainty of the US-China "tariff war". Since the Trump administration came to power, it has implemented high tariffs to curb China's rise, raising tariffs on Chinese steel and steel-consuming products to unprecedented levels. Not long ago, the US government announced a reciprocal tariff policy (originally scheduled to take effect on April 9 this year), raising the cumulative tariffs on China to 104%. Although a recent agreement between China and the US has temporarily suspended excessively high tariffs on Chinese goods for 90 days, the US-China trade war is far from over, especially regarding tariffs on steel and steel-consuming products (such as automobiles). For example, recently, US President Trump announced that he would increase tariffs on imported steel, aluminum, and their derivatives from 25% to 50%, effective from 00:01 EDT on June 4, 2025. This year, the US has also significantly increased import tariffs on steel-consuming products such as automobiles, and the so-called "301" trade discrimination clauses remain in effect. Furthermore, the Trump administration's contractual integrity is questionable; even signed agreements can be overturned at will. Therefore, the future of high US tariffs on Chinese goods remains highly uncertain, particularly the final form and scope of these tariffs.
Trump's high tariff policies and their uncertainty are a major concern, even in US structural reports. In the recently released Beige Book from the Federal Reserve, the word "tariff" appeared 122 times, while "uncertainty" related terms appeared 80 times. The high uncertainty of US tariff policies will inevitably worsen the export environment for Chinese steel and steel-consuming products, ultimately putting significant pressure on steel market prices and expectations.
The second major uncertainty is the uncertainty of global economic growth. The Trump administration's high tariffs target not only China but also countries worldwide, including allies, causing significant disruption to global trade and world economic growth and increasing uncertainty in the US and global economic growth. In the same Beige Book released by the Federal Reserve, the Fed described the outlook for US and global economic growth as "somewhat pessimistic and uncertain." Data released by ISM (June 4) shows that due to a sudden drop in demand caused by high tariffs, the US ISM services index fell to 49.9 in May this year, its first contraction in nearly a year and far below the expected 52. Recently (June 3), the Organisation for Economic Co-operation and Development (OECD) again lowered its global economic growth forecast for this year and next. Global economic growth is projected at 2.9% for both 2025 and 2026, down 0.2 and 0.1 percentage points respectively from the March forecast. The reason for the downward revision is the US government's trade barriers and the significantly increased uncertainty surrounding the economic and trade outlook. This uncertainty has severely negatively impacted global business and consumer confidence, hindering global trade and investment in various countries, ultimately suppressing steel demand growth.
The third major uncertainty is the uncertainty of China's steel and steel capacity release. Although the authorities have called on Chinese steel companies to practice self-discipline in production restrictions to avoid price "involution," once prices rise to a profitable level, steel companies will actively increase production, openly or secretly, leading to oversupply in the steel market and heavy pressure on prices. Statistics show that from January to April 2025, the national steel output was 480.21 million tons, a year-on-year increase of 6%; among them, the steel output in March was 134.42 million tons, a year-on-year increase of 8.3%; and the steel output in April was 125.09 million tons, an increase of 6.6%, significantly exceeding the growth rate of total steel demand during the same period. It is expected that the output of crude steel and steel in the first half of the year will continue to increase.
Therefore, the existence of the above three uncertainties has led to a lack of confidence among current steel market participants, a strong selling atmosphere, and a lack of willingness to hold inventory. Lange Steel Network market monitoring data shows that as of June 9, 2025, the national average steel price was 3458 yuan per ton, down 0.4% month-on-month and down 13.6% year-on-year. As of June 6, the social inventory of five major steel varieties in 29 cities across the country was 8.3 million tons, down 11.4% month-on-month and down 28.4% year-on-year.
Before the above uncertainties are eliminated, a fundamental reversal in national steel market prices is unlikely. (Original article by Lange expert Chen Kexin, please indicate the source when reprinting)
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