Steel rebar futures remain around CNY 3,200 per ton, down 3.5% so far this year, largely due to rising production in China and ongoing global trade protectionism.
Steel futures remain subdued
The imposition of 25% levies on steel imports by US President Trump, alongside a hike in tariffs on Chinese goods to 20%, has escalated trade tensions and raised concerns over a potential economic slowdown. These protectionist measures have disrupted global trade flows and added volatility to steel prices, affecting both supply and demand dynamics in the global market.
Meanwhile, China’s steel production and exports have continued to rise, with production up 4.7% to 224 million tons in the first two months of the year, and exports increasing by 6.7%. This increase in output comes despite the challenges posed by global trade restrictions, highlighting China’s role as a dominant player in the global steel market. However, the country faces a paradox where production is rising while domestic demand, particularly in key sectors like construction, is weakening. In response, China has announced plans to restructure its steel industry, with intentions to cut production by 50 million tons annually as part of efforts to curb excess capacity and reduce environmental impact. This restructuring plan is aimed at addressing long-term sustainability but may lead to short-term market disruptions.
Steelmakers grapple with significant losses
Steelmakers, including major players like Angang Steel Co., are grappling with significant losses, driven by shrinking demand linked to China’s property crisis and falling steel prices. The property sector’s troubles have been exacerbated by a slump in housing sales, which in turn has weakened demand for steel, a key input in construction. The latest data shows that average resale home prices across 100 Chinese cities fell at a sharper month-on-month pace in March, signaling that the property market remains under pressure. This persistent weakness in the property sector has had ripple effects across industries that rely on steel, including construction and infrastructure development.
Chinese steel producers adjust outlook
As global steel prices face downward pressure, Chinese steel producers are being forced to adjust to a difficult market environment. The combination of rising production, falling domestic demand, and increased global trade barriers presents a challenging outlook for the sector. While the planned restructuring could help address overcapacity in the long term, the immediate future remains uncertain, with steelmakers needing to navigate a volatile mix of domestic economic issues and shifting global trade policies.
