The Fourth Year of Cyclical Adjustment in the Steel Industry: While Performance Is Improving, Risks Still Need to Be Guarded Against—“Warmth” Is Gradually Rising, but the “Cold Winter” Has Yet to Subside.
Since steel production peaked in 2021, China’s steel industry has entered a long and profound adjustment “major cycle.” However, as an indispensable “ballast” for the national economy, the steel industry’s fundamental foundation remains solid.
In 2025, the steel industry will exhibit distinct phased fluctuation characteristics, and the supply-demand contradiction will persist; however, ... Coal prices Driven by a significant decline and stronger-than-expected exports, the industry’s profitability has improved compared to 2024. Meanwhile, the structural divergence in end-market demand has become the core support for the industry’s resilience, enabling it to accelerate its transformation and adjustment amid market fluctuations.
Industry profits began to recover in 2025, but pressure intensified in the fourth quarter.
Looking back at the entire year of 2025, the steel industry has exhibited distinct phased characteristics.
In the first quarter, the incremental release of infrastructure investment provided strong short-term support for steel demand, and the market showed signs of stabilization at the outset. However, as we entered the second and third quarters, the industry experienced several rounds of ups and downs: The U.S. restarting its tariff war triggered market concerns about exports and the overall trade environment, putting downward pressure on market sentiment in the short term. Subsequently, the Geneva talks between China and the U.S. marked the beginning of a more manageable phase in their economic and trade disputes, gradually easing the market’s pessimistic mood. Coupled with the implementation of medium- and long-term policies—such as the advancement of domestic “anti-involution” measures and the construction of a unified national market—the expectation of an optimized competitive landscape in the industry has been steadily rising. Steel prices It is poised to see a noticeable rebound.
Improvements on the cost side, coupled with better-than-expected export performance, are jointly laying a solid foundation for the industry’s development during its transitional phase. Wang Jianhua, chief analyst at Shanghai Steel联, pointed out that in 2025... Coal Prices have fallen sharply, creating favorable conditions for steel companies to control costs. At the same time, steel exports have achieved growth that exceeded expectations. The combined effect of these two factors has helped the industry maintain a stable and orderly operating environment.
Reflecting on the performance of listed steel companies, the industry’s operating results continued to improve in the first three quarters, with leading enterprises showing a notable recovery in profitability: Hebei Iron and Steel Co., Ltd. achieved revenues of 96.542 billion yuan, up 8.05% year-on-year, and net profit attributable to shareholders reached 823 million yuan, a substantial increase of 44.71% over the same period last year; CITIC... Special steel Although revenue declined slightly by 2.75% year-on-year to RMB 81.206 billion, net profit attributable to shareholders still reached RMB 4.33 billion, representing a year-on-year increase of 12.88%. Leading companies such as Baosteel Shares and Shougang Shares also showed a marked recovery in net profit.
However, the industry once again faced pressure in the fourth quarter. Affected by the deep adjustment in the real estate sector, weak end-demand led to a simultaneous buildup of both corporate inventories and social inventories, causing monthly profit levels in the steel industry to continue declining. Mysteel Data shows that in the fourth quarter, hot-rolled steel profits remained consistently in the loss range. Rebar It has also experienced a prolonged period of phased losses. In response, Jiang Wei, Deputy Secretary of the Party Committee, Vice President, and Secretary-General of the China Iron and Steel Association, suggested at the “2026 Steel Market Outlook and ‘MySteel’ Annual Conference” that steel companies should prioritize “risk prevention” in their winter stockpiling strategies and adopt a low-level winter stockpiling approach to cope with market uncertainties.
Data source: SteelLink Data
From a year-round perspective, the “supply-demand imbalance + high inventory levels” constitute the industry’s core pain points, and the operational pressure to “trade price for volume” continues to intensify. At the meeting, Jiang Wei explicitly pointed out that in 2025, there is a significant negative correlation between steel enterprises’ production volumes, inventory levels, and sales profit margins—namely, the higher the production volume and the greater the inventory buildup, the lower the sales prices and profit margins tend to be. This inverse relationship between inventory and profits has become an intractable dilemma for the industry. The trading sector feels this impact particularly acutely. Wang Xinzhang, Assistant General Manager of South China Materials Group, bluntly stated that in 2025, steel trading companies will face an extremely difficult situation: weak end-demand has led to the absence of both the traditional peak season of “Golden September and Silver October” and the year-end rush to meet deadlines; as efforts to build a unified national market gain momentum, regional price differentials continue to narrow, squeezing the profitability of cross-regional sales; compounded by increasingly fierce competition among steel mills, the industry’s “involution” pains have now fully spilled over into the trading segment.
Notably, in 2025, the structural divergence on the demand side will be particularly pronounced, serving as a key source of resilience for the industry. Traditional demand sectors continue to face persistent pressure: Yu Xiaoyu, General Manager of the E-Han Think Tank Research Center, pointed out that the real estate sector remains in a “bottoming-out” phase. Although its share of GDP still stands at 13% and some structural bright spots do exist, its drag on construction steel demand remains significant. Investment in infrastructure has also declined; as Wang Jianhua highlighted at the My Steel Annual Conference, from January to November 2025, the planned investment amount for newly started projects fell by 11.2% year-on-year.
In stark contrast, the robust growth in demand for steel in high-end manufacturing has served as an effective hedge. Chen Shihua, Deputy Secretary-General of the China Association of Automobile Manufacturers, predicts that by 2025, China’s annual automobile production and sales will surpass 34 million vehicles, representing a nearly 10% increase over the previous year. The machinery industry has also shown impressive performance: Luo Junjie, Vice President of the China National Machinery Industry Federation, revealed that in the first three quarters, the value-added growth rate of the machinery industry remained above 8.5%, while exports to major economies achieved double-digit growth. Supported by the “trade-in” policy, the home appliance industry maintained a growth rate roughly on par with the previous year, a fact confirmed by Luo Yuanyuan, Deputy Secretary-General of the Household Electrical Appliances Association.
Changes in demand structure directly drive upgrades in product mix—once the “largest-selling product” Hot rolling The output of threaded steel bars has declined significantly, replaced instead by hot-rolled wide steel strips used in industrial manufacturing. These strips have become the core driving force behind the structural shift from old to new steel products, and the pace of industry transformation continues to accelerate.
The “winter period” of 2026 has yet to pass, but industry optimism is gradually picking up.
In 2026, the “winter period” for the steel industry has yet to fully pass, but ongoing policy guidance and deepening industry consensus are gradually boosting market optimism. Faced with a complex and ever-changing external environment, favorable policies and the industry’s clear direction—focused on controlling production, reducing inventory, optimizing supply-demand structures, and strengthening self-discipline and collaboration—are becoming increasingly evident.
The marginal improvement in the macroeconomic environment provides strong support for the industry’s development. Professor Shen Yi of Fudan University stated that the strategic rivalry between China and the U.S. is entering a phase of easing, creating more stable external conditions for the steel industry’s import and export trade as well as international cooperation. Mysteel forecasts that in 2026, policies will strike a balance between addressing potential growth constraints and meeting medium- and long-term development needs. Real estate policies will shift from “risk prevention” to supporting a “soft landing,” which is expected to moderately ease downward pressure on steel demand in related sectors.
Jiang Wei pointed out that the study "Research on China's Steel Development Path during the 15th Five-Year Plan" envisions that, in the 15th Five-Year Plan period, China's steel industry should use the certainty of high-quality development to hedge against the uncertainties in the external environment. Relying solely on exports to address the issue of oversupply in China's steel industry is neither realistic nor feasible, and certainly not sustainable. Therefore, managing production rhythms and controlling enterprise inventories have become the top priorities for the industry to safeguard its profitability at present. The urgency of China's steel industry shifting from “competition” to “coopetition” is becoming increasingly apparent.
As we enter 2026, under the backdrop of the “dual-carbon” strategy, the guiding role of industrial policies is set to become even stronger. An Yu, Chief Market Analyst at the Marketing Center of Angang Steel Co., Ltd. (000898.SZ), analyzed from a policy perspective that total steel production in 2026 is expected to show a contracting trend. Zhu Dinghua, Head of the Nanjing Steel Market Department, on the other hand, pointed out—based on industry realities—that although the level of self-discipline within the industry has continued to improve in recent years, the fundamental contradiction of oversupply in the market remains unresolved. Combating inward competition and strengthening self-discipline will continue to be key challenges for the industry’s development.
Against the backdrop of clear policy guidance and a growing industry consensus, industry insiders’ expectations for 2026’s development have further improved compared to 2025. Dai Zhaoqian, Head of the Market Management Department at Yongfeng Group’s Supply and Marketing Platform, stated that in 2025, signs of price concessions on the raw materials side have already emerged, signaling that the industry’s market conditions have entered the second half. Structural opportunities and definite growth prospects are gradually becoming apparent.
The anticipated optimization of raw material costs has become a key support for the industry’s optimistic sentiment. Wang Jianhua predicts that by 2026, Iron ore The average price is expected to fall below $95 per ton. Coking coal price A phased rebound could then emerge. Du Menghua, General Manager of Ningbo Fuchen Mining, believes that the rapid development of the new energy industry is significantly impacting traditional thermal power, which is gradually being relegated to a supplementary power source. This trend will profoundly affect the structure of coal demand and amplify price volatility, while iron ore costs are expected to continue declining. Wang Xinzhang, Assistant General Manager of South China Materials Group, also noted that in 2026, market pressures will further shift toward the iron ore raw material end, driving cost optimization. An Yu added that, influenced by exchange rate fluctuations, the downward trend in iron ore prices in 2026 could become even more pronounced.
Although adjustments to the supply-demand structure will still take time, positive changes are already in the making. Wang Jianhua anticipates that in 2026, supply constraints in the steel industry will further intensify. Several factors—including deepened ultra-low emission upgrades, the implementation of a three-tier energy consumption system, tighter carbon quota management, and steady progress in efforts to combat "internal involution"—will collectively drive improvements in supply quality while reducing overall supply volume. Meanwhile, downward pressure from declining exports will compel domestic production to adjust accordingly. As a result, China's crude steel output is expected to decline slightly, and the industry’s supply and demand are likely to achieve a weak balance.
In terms of export markets, opportunities and challenges coexist. Zhu Dinghua noted that 2026 may see a concentrated period of arbitration in anti-dumping investigations against Chinese steel products by various countries, which will impose certain constraints on export business. An Yu also cautioned companies to closely monitor the potential impacts arising from adjustments in industrial policies, such as changes to export licenses. Taking into account multiple factors, Wang Jianhua forecasts that China's domestic steel exports could decline by 19 million tons in 2026.
However, overseas markets still hold hidden growth potential. Wang Zhihong, General Manager of Baishi Asset, noted that if the international situation sees a significant easing by 2026 and the Russia-Ukraine conflict reaches a peaceful ceasefire, black metals could see an increase in demand.
On the demand side of the domestic market, there is a clear trend of structural differentiation. Zhu Dinghua predicts that total steel demand will continue to decline in 2026, but the differentiation among steel varieties will intensify further: demand for steel used in high-end manufacturing will keep rising, while demand for general-purpose steel will face increasingly significant downward pressure due to medium- and long-term factors such as negative population growth and the end of the peak period of urban construction.
Among these, the demand highlights in the shipbuilding and home appliance industries are worth noting. Tan Naifen, Deputy Secretary-General of the China National Shipbuilding Industry Association, stated that among the world’s 18 types of vessels, China ranks first globally in 15 of them, laying a solid foundation for steel demand in the shipbuilding sector during the 15th Five-Year Plan period. Meanwhile, the container shipping index remains at a high level, and steel consumption by container ships is expected to rebound in 2026. In the home appliance sector, Luo Yuanyuan anticipates that the “trade-in” policy will likely continue to be introduced in 2026. At the start of the 15th Five-Year Plan, the home appliance industry is expected to maintain steady growth, providing stable support for related steel demand.
Overall, the steel industry will still be in a transitional phase—“a cold winter”—in 2026. Qian Min, Deputy Director of the Operations Center at Zhengda Pipe Group, stated that steel enterprises urgently need to break away from their reliance on external market conditions and policies—a “seeking outward” approach—and fully shift toward a development model that focuses on strengthening internal capabilities—a “seeking inward” approach. By leveraging technological innovation, lean management, and product upgrades, they can build core competitiveness that enables them to navigate industry cycles, laying a solid foundation for the industry to fully emerge from the cold winter and move toward high-quality development.
