The World Steel Association recently indicated that China’s steel industry is facing an increasingly challenging problem of long-term overcapacity accumulation, which is much more difficult to handle than commonly thought. The main reason lies in the high degree of connection between China’s macroeconomy and its steel industry. Any policy directly cutting steel production could potentially trigger chain impacts on local economies, employment, and upstream raw material industries.
According to the Secretary-General of the World Steel Association, Edwin Basson, China’s steel industry has experienced rapid expansion over the past two decades, with annual crude steel production maintaining at around 1 billion tons in recent years. However, against the backdrop of a prolonged downturn in the real estate sector and weakening domestic demand, the Chinese steel industry is facing a new round of structural oversupply.
Basson emphasized that “closing just one steel plant could lead to significant chain reactions in other sectors of the domestic economy,” adding that “there is no immediate solution in the short term.”
Data from the National Bureau of Statistics of China shows that based on the accumulated output for the first ten months of this year (about 818 million tons), the annual crude steel production in China is expected to remain around 1 billion tons in 2025. This indicates that despite low profit margins, production remains high. Soft domestic steel demand has prompted Chinese steel mills to increase overseas export efforts, seizing market share at lower prices and putting significant pressure on steel enterprises in Europe, America, and many Asian countries.
Since the beginning of the “14th Five-Year Plan,” China’s steel consumption has seen a continuous decline. Domestic apparent steel consumption has dropped from the peak of 1.04 billion tons in 2020 to 890 million tons in 2024, a decrease of 150 million tons, with an average annual decline of 3.8%. The latest data from the China Iron and Steel Association show that in the first three quarters of 2025, domestic apparent steel consumption was 649 million tons, a year-on-year decrease of 5.7%.
Apparent steel consumption is an indicator of the overall demand for steel in a country or region over a certain period. However, not all steel materials may be fully consumed, and deductions for other losses and storage are necessary to determine the actual consumption.
The World Steel Association predicts that China’s steel demand will continue to decline by about 2% in 2025, with a further 1% decrease expected in 2026 if the real estate market can rebound. The persistently weak demand is driving Chinese steel exports close to historic highs. In the first three quarters of this year, China’s steel exports increased by 9.2% to reach 87.96 million tons.
Against this backdrop, the low-price competition of exported steel has led to escalating trade frictions. In recent years, Vietnam, Thailand, Mexico, Brazil, and several EU countries have successively initiated or continued anti-dumping and anti-subsidy measures on various steel products from China, with some products facing tariff rates of tens of percentage points.
Earlier this year, President Trump increased import tariffs on steel and other products, further tightening the global steel trade environment. Several major export markets have erected higher trade barriers against Chinese steel.
Under the “Foreign Subsidies Regulation” (FSR) framework officially implemented by the EU in 2023, scrutiny on Chinese enterprises has significantly increased. Although current investigations mainly focus on new energy and infrastructure sectors, concerns have been raised in Brussels regarding the overflow of Chinese steel capacity. In October this year, the EU imposed a 62.5% anti-dumping duty on “steel track shoes” from China.
Canada, following the imposition of a 25% tariff on Chinese steel and aluminum products in October 2024, tightened measures in July 2025 by imposing a 25% tariff on imported steel from China and restricting import quotas. Excess imports beyond quotas may face a 50% tariff.
In September 2025, the Mexican government proposed a new law to impose a maximum 50% tariff on Chinese automobiles, steel, and textile products.
Basson pointed out that from 2000 to 2020, the global steel industry market environment was relatively open. However, countries have since implemented restrictive measures for industrial protection and geopolitical competition, leading to a disappearance of cross-continental flows, which has had a profound impact on the industry.
Over the past decade, Beijing has implemented the “supply-side structural reform” several times, closing some outdated steel production facilities from 2016 to 2020. However, factors such as the financial dependence of local government steel enterprises, the intertwined nature of private and state-owned enterprises, and employment pressures have led to the national steel output remaining high, failing to fundamentally solve the problem of structural oversupply.
Since 2024, large infrastructure projects in the Middle East have driven Saudi Arabia and other markets to become new directions for Chinese steel exports, temporarily easing pressure from trade barriers in the United States and Southeast Asia. However, with more countries upgrading protection measures, Chinese steel exports are facing increasing pressure.
According to the Caixin website, Chen Hongbing, President of the Jiangsu Iron and Steel Association, stated that China’s direct steel exports may halve in the next five years, reshaping the industry.