The Chinese steel industry is experiencing a significant transformation as domestic demand shows signs of flattening, with industry experts projecting potential declines in 2025. This shift comes as the world's largest steel producer and consumer grapples with oversupply issues and increasing international trade frictions, according to recent reports from the China Iron and Steel Association.
The first three quarters of 2024 have witnessed a notable decline in China's apparent steel consumption, dropping 6.2% year-on-year to 688 million metric tons. CISA officials predict that total consumption for the year will fall below 900 million metric tons, with projections suggesting this level will remain relatively stable at around 800 million metric tons through 2035, marking a significant departure from previous growth patterns.
Production figures reflect this downward trend, with crude steel output in the first nine months of 2024 decreasing by 3.6% to 768.48 million metric tons. Despite this reduction, annual output is expected to maintain levels above 1 billion metric tons, highlighting the ongoing challenge of aligning production with diminishing demand. This production pattern follows Beijing's 2021 initiative to cap annual growth as part of broader carbon emission reduction efforts.
A fundamental shift is occurring in China's steel consumption patterns, with the manufacturing sector emerging as an increasingly important consumer. Jiang Wei, CISA's vice chairman and secretary general, notes that manufacturing's share of steel consumption is expected to reach or exceed 50% this year. This transformation comes as the traditionally dominant property sector continues to experience a prolonged downturn, significantly impacting steelmakers' profitability.
The industry's structure reveals another challenge, as market concentration among Chinese steel producers lags behind other developed nations. Wang Bin from CISA reports that China's top 10 steel producers account for 40.9% of market share, significantly lower than the 65% to 85% concentration seen among the top producers in developed countries.
International trade dynamics add another layer of complexity to the industry's challenges. Chinese steelmakers, facing domestic market pressures, have increased export volumes, but this strategy faces mounting risks due to growing global trade tensions. The situation highlights the delicate balance Chinese producers must maintain between managing domestic oversupply and navigating international market access.
