Steel rebar futures fell to CNY 3,200 per tonne in March, the lowest in two months, as weaker demand outweighed the initial support from government-mandated capacity cuts.
Steel retreats to two-month low
The drop in prices reflected concerns over sluggish industrial activity in China, with consumer and producer prices declining more than expected in February. This underscored the persistent weakness in domestic demand for manufactured goods, as businesses and consumers scaled back spending despite ongoing government stimulus efforts. Additionally, credit aggregates are set to slow, further constraining financing for construction and infrastructure projects that typically drive steel consumption.
At the same time, global demand for Chinese steel appeared increasingly uncertain, with several governments tightening trade barriers against imports. Taiwan launched an anti-dumping probe on Chinese steel products, joining a growing list of nations—including Vietnam, South Korea, the US, and Brazil—that have imposed or pledged tariffs and restrictions to protect their domestic steel industries. This shift in global trade policy dampened expectations that export markets could continue to absorb surplus Chinese production, a key factor that had supported Chinese mills amid slowing domestic demand.
China steel exports remains robust
Despite these challenges, China’s steel exports remained robust in early 2025, growing 7% in the first two months of the year to reach 17 million tons. This followed a record-high 130 million tons exported in 2024, as mills sought to offset weak local demand by aggressively expanding sales abroad. However, with rising protectionism among major trading partners, the sustainability of such high export volumes is increasingly in question.
China adopts new policy
In response to mounting industry pressures, Beijing signaled during its annual Two Sessions meetings that it would push for further capacity cuts in the steel sector. While specifics have yet to be announced, policymakers are expected to enforce stricter production limits to curb oversupply and stabilize prices. These measures align with broader efforts to transition the economy toward high-quality growth while addressing the environmental and economic challenges posed by excess steel production. Nevertheless, uncertainty remains over how extensive the capacity cuts will be and whether they will be sufficient to balance supply and demand in the coming months.
