Why have steel prices increased recently?

Since the end of June this year, steel prices nationwide have continued to rise, experiencing a surge. Data from Lange Steel Information's market monitoring shows that as of July 23, 2025, the average national steel price was 3640 yuan/ton, a 6.5% increase compared to June 26, 2025; during the same period, the closing price of the main rebar contract rose by approximately 4.2%. Why have national steel prices risen recently? A preliminary analysis suggests the following factors are at play.
    

Firstly, the steel price itself demanded a rebound. For some time, negative factors such as excessive supply pressure in the steel market, uncertainty surrounding US high tariffs, and a lack of confidence among steel market participants, all combined to cause a weakening and downward trend in national steel prices. As of June 30, 2025, the average national steel price was 3430 yuan per ton, a 6.3% decrease from the beginning of the year (January). During the same period, the closing price of the main Shanghai rebar contract fell by approximately 23%. It can be said that by June, the national steel market had reached its most pressured period, with prices falling to the point where a rebound was strongly demanded, as there are no commodities that only fall and never rise.

Secondly, the data related to steel demand in the first half of the year exceeded expectations. The latest statistics show that in the first half of this year, as various policies were accelerated and their effects became apparent, the macroeconomic situation withstood pressure and moved forward. The "three engines" of national steel demand showed strong growth resilience amidst multiple challenges. In the first half of the year, the national value-added industrial output above designated size increased by 6.4% year-on-year, an increase of 0.4 percentage points compared to the first half of 2024 (6%), with the value-added of equipment manufacturing, which consumes a significant amount of steel, increasing by 10.2% year-on-year. Important steel-consuming industries and products, such as automobiles, railways, ships, machine tools, industrial robots, and generator sets, all experienced double-digit growth. Steel exports also increased significantly. According to the General Administration of Customs, from January to June 2025, China exported 58.147 million tons of steel, a year-on-year increase of 9.2%; in June alone, steel exports reached 9.678 million tons, a year-on-year increase of 10.7%, showing an upward trend. Even fixed asset investment, which was hampered by a decline in real estate development investment, showed an overall expansion of investment. According to statistics, fixed asset investment nationwide increased by 2.8% year-on-year in the first half of 2025; among them, infrastructure investment, which consumes a significant amount of steel, increased by 4.6% year-on-year, and manufacturing investment increased by 7.5%. If the impact of the decline in real estate investment is excluded, the actual growth rate of fixed asset investment nationwide was 5.3%, an increase of 0.5 percentage points compared to the actual growth rate for the whole of last year.

Thirdly, stronger policy support boosted market participant confidence. To cope with the deterioration of the international trade environment, especially the high tariff pressure from the US Trump administration, the market generally expects that Chinese decision-making departments will increase policy support in the second half of the year, including a more proactive fiscal policy, a more relaxed monetary policy, and a more optimized real estate regulation policy, such as increasing and accelerating the release of fiscal funds such as bonds in the second half of the year to promote the start of more construction projects; continuing to lower reserve requirements and interest rates to provide the market with more low-cost liquidity; fully opening up housing purchase restrictions, continuing to lower the threshold for home purchases and reducing home purchase costs, etc. Better policy orientation will inevitably expand steel demand and boost confidence among steel market participants.

Fourthly, the price of steelmaking raw materials increased. In the second half of the year, the prices of steelmaking raw materials nationwide rose first, and the increase was greater than that of steel prices; this includes "anti-involution" work arrangements and media guidance, as well as market speculation, but more importantly, it is due to the effects of market fundamentals. For example, the continuous decline in the prices of raw materials such as iron ore, coking coal, and coke, and the market rule of "buying high and not buying low," led steel companies and traders to generally operate with low inventories, with overall inventories already below normal levels. In this situation, any disturbance will lead to a significant price increase. It is this initial rise in the price of smelting raw materials that provided the basis and support for the subsequent rise in steel prices.

Furthermore, the rise in domestic prices of steelmaking raw materials such as iron ore, coking coal, and coke is also due to the depreciation of the US dollar this year. As is well known, tariffs have created uncertainty about US economic growth, high debt is unsustainable, the US dollar's safe-haven effect has weakened, and multiple factors such as the upcoming interest rate hike by the Federal Reserve and expectations have led to a significant depreciation of the US dollar index in the first half of this year. Due to the continued existence of the above factors, it is expected that the US dollar index will continue to depreciate in the second half of the year. The depreciation of the US dollar index will inevitably lead to a rise in the prices of black series commodities in the international market, and thus provide exchange rate cost support for domestic steel prices.

Therefore, due to the influence of the above factors, domestic steel prices have experienced a round of increases, and due to the continued existence of related factors, there is reason to be cautiously optimistic about the future steel market, but it must be noted that the biggest pressure on the current and future steel market still comes from the uneven release of steel production capacity. According to statistics, from January to June 2025, the national steel output was 734.38 million tons, a year-on-year increase of 4.6%, setting a new high; among them, the steel output in June was 127.84 million tons, a year-on-year increase of 1.8%, and the average daily steel output increased by 3.6% month-on-month. Based on this calculation, if not controlled, it is estimated that the national steel output in 2025 will reach about 1.5 billion tons, an increase of more than 4% year-on-year. As steel prices continue to rise, this pressure will also continue to increase, and this should not be taken lightly. (Original article by Lange expert Chen Kexin, please indicate the source when reprinting)