Domestic construction steel will enter a new phase of total volume decline and structural optimization
On July 14-15, 2025, the Fifth Central Urban Work Conference was held, clearly stating that China's urbanization is shifting from a period of rapid growth to a period of stable development, and urban development is transitioning from large-scale incremental expansion to a stage focused on stock quality improvement and efficiency enhancement. This shift will have a profound impact on the domestic steel industry, mainly reflected in changes in steel demand, supply structure, and industrial upgrading.
Construction Steel Demand enters a phase of total decline and structural optimization
In the urbanization process over the past decades, urban construction was mainly driven by total expansion, and the demand for construction steel showed explosive growth. From 1996 to 2017, China's urbanization rate (in the 30%-60% phase) increased annually by 1.42%; from 2018 to 2024, the annual growth rate of urbanization slowed to 0.97%. By 2024, China's urbanization rate has reached 67%. According to the experience of developed countries such as the US, Japan, and South Korea, after surpassing 70%, the growth rate will further slow down. Against this backdrop, the demand for construction steel will undergo fundamental changes. Traditional construction steel demand has been continuously shrinking since the real estate cycle peaked in 2021. Rebar Apparent consumption data also peaked accordingly, with an average annual decline of 5.88% from 2021 to 2024, and the possibility of a short-term reversal of this trend is low.
Although the total volume of construction steel is declining, structural opportunities still exist. This conference emphasized steadily promoting the renovation of urban villages and dilapidated housing, advancing the construction of urban infrastructure lifeline safety projects, and accelerating the renovation and upgrading of old pipelines. This indicates that future urban work will focus on the renewal and renovation of existing buildings and the repair of underground pipelines. According to relevant information from the National Development and Reform Commission, the total length of urban gas, water supply and drainage, heating, and other pipelines requiring renovation in the next five years is about 600,000 kilometers, with a total investment of about 4 trillion yuan, which will drive the demand for rebar, medium and heavy plates and steel pipes However, the steel volume used is significantly lower compared to new buildings of the same scale.
At the same time, the conference proposed building green and low-carbon beautiful cities. Previously, the Ministry of Housing and Urban-Rural Development proposed that by 2025, all newly built urban buildings will fully implement green building standards. Ultra-low energy buildings and related renovation projects will drive related steel demand. Steel structures, due to their short construction cycles, good seismic performance, and environmental friendliness, have seen rapid demand growth in recent years. From 2020 to 2024, China's steel structure processing volume increased from 89 million tons to 109 million tons, with an average annual growth rate of 4.5%. According to the China Steel Structure Association, the steel structure processing volume is expected to reach 140 million tons in 2025 and 200 million tons by 2035.
Construction steel demand growth is relatively concentrated in certain regions, with manufacturing possibly becoming the main driver of steel demand
Previously, during the total expansion phase, construction steel demand increased in all regions nationwide; after entering the stock optimization phase, the construction of urban agglomerations will become the new growth point for steel demand. This conference emphasized developing group-style, networked modern urban agglomerations and metropolitan areas. Therefore, future construction steel demand will likely be concentrated in urban agglomerations such as Beijing-Tianjin-Hebei, the Yangtze River Delta, and the Guangdong-Hong Kong-Macao Greater Bay Area. The construction of intercity railways, transportation hubs, bridges, and tunnels will require large amounts of construction steel. Because population will concentrate in urban agglomerations in the future, some third- and fourth-tier cities or county-level areas will have limited growth space for construction steel demand, and may even see declines.
At the same time, with the decline in total construction steel demand and the need for manufacturing transformation and upgrading, steel use in manufacturing will become the main force driving steel demand. According to the author's estimates, the proportion of construction steel has dropped from 63.74% in 2020 to 56.99% in 2024 (with real estate steel demand dropping from 39.79% to 23.67%), while manufacturing steel has risen from 36.26% to 43.01%. Based on changes in steel consumption structure, steel mills have also made deep adjustments in production over the past five years, actively reducing construction steel capacity and increasing manufacturing sheet capacity in product structure. In 2024, the output of rebar and wire rod by key steel enterprises decreased by 13.84% and 1.73% year-on-year respectively. Meanwhile, hot-rolled thin and wide steel strips and cold-rolled thin and wide steel strips increased by 3.14% and 1.95% year-on-year respectively, with electrical steel sheets (strips) and cold-rolled electrical steel sheets (strips) increasing by 7.75% and 5.41% respectively.
Steel Industry Upgrading May Accelerate Further
The trend of declining total steel demand and structural optimization brought by the Central Urban Work Conference and other factors will force the steel industry to accelerate its transformation and upgrading.
On one hand, to adapt to manufacturing transformation and upgrading and green building steel demand, production of high value-added sheets will increase, such as high-strength steel for new energy vehicle consumption growth, silicon steel, 、 galvanized sheets; for the growth of wind power and photovoltaic installations, production of medium and heavy plates for wind power towers, pressure vessel steel, corrosion-resistant alloy steel, and other varieties will increase; for downstream lightweight and automation demand characteristics, development of lightweight stainless steel for home appliance panels, stainless steel, and high-precision tolerance ship plates will be promoted. At the same time, in construction steel, research and development of high-strength seismic steel and corrosion-resistant steel will be strengthened.
On the other hand, the trend of green and low-carbon transformation of the entire industry will also accelerate further. According to relevant data, by the end of July, 600 million tons of crude steel capacity and 147 steel enterprises nationwide have completed full-process ultra-low emission transformation, with plans to cover 80% of capacity by the end of 2025.
Additionally, based on the current situation where real estate investment is still declining by more than 10%, the intensity of phasing out backward capacity will increase. At the beginning of July, the Central Financial and Economic Commission reiterated the emphasis on "anti-involution" and promoting the orderly exit of backward capacity. In the future, this may be achieved through joint restructuring to replace capacity trading, cancellation of capacity quota trading, etc., further forcing the orderly exit of inefficient capacity to improve the industry's supply and demand pattern.
In summary, the signals released by the Central Urban Work Conference indicate that domestic construction steel will enter a phase of total decline and structural optimization. Traditional construction steel demand will continue to decline, while steel demand for steel structures and underground pipelines will increase. Moreover, the incremental demand for construction steel will further concentrate in urban agglomerations. At the same time, manufacturing steel demand will become the main force supporting steel demand. This change in demand trends will force the steel industry to accelerate industrial transformation and upgrading in product structure optimization, green and low-carbon development, and the exit of backward capacity.
