Steel rises to over three-month high

Steel futures in China climbed to CNY 3,170 per tonne in July, reaching their highest level in over three months, as expectations of reduced output and increased public expenditure in infrastructure helped counterbalance concerns about a persistently oversupplied market.

The rebound comes amid a renewed push by Chinese policymakers to reform industrial policy, with fresh commitments to address longstanding overcapacity issues in the steel sector—a pledge aimed at stabilizing pricing and improving profitability across the supply chain.

Such reform efforts could offer much-needed relief to blast furnaces and steel mills, many of which have been grappling with razor-thin margins due to a prolonged downturn in property development and tightening global trade conditions.

Demand for steel has remained under pressure as the real estate crisis continues to ripple through the broader Chinese economy, while the growing wave of protectionist trade measures from key importers—including potential tariffs and anti-dumping investigations—has further restricted external markets for Chinese steel.

Adding to the bullish sentiment, China’s top steelmaker, Baosteel, recently projected that national crude steel output could drop by as much as 50 million tonnes in 2025 compared to last year, reinforcing expectations of a tighter supply environment.

At the same time, prices found additional support from the announcement of a massive CNY 1.2 trillion hydropower plant project. Beyond boosting short-term demand for ferrous metals and construction-grade steel, the project underscores Beijing’s commitment to using large-scale infrastructure investments as a lever to stimulate growth.

These initiatives are seen as part of a broader strategy to stabilize the economy in the face of structural headwinds, particularly from the struggling property sector.

Together, these developments signal a potential turning point for China’s steel market, with tighter supply, industrial reforms, and targeted stimulus measures offering a possible path toward more balanced fundamentals in the second half of the year.