China's steel supply glut to persist over next couple of years

China's steel industry is set to enter a period of deep adjustment over the next two or three years against the backdrop of a persistent oversupply, predicts Liu Andong, Vice President of the China Iron and Steel Association (CISA).

"China's crude steel output is falling, but it's not rapid enough to offset the drop in steel consumption, leaving the supply-demand imbalance prominent," Liu told delegates at the 17th Ferrous Value-China Summit held in Southeast China's Xiamen city on November 12. "In the first nine months of this year, China's crude steel output declined by 2.9% on year, but apparent steel consumption dropped by a sharper 3.8%," he illustrated.

The trend of domestic steel demand is shifting from traditional construction toward manufacturing and high-end products, Liu noted. The manufacturing sector's share of steel consumption has grown from 42-43% in 2020 to 51% in 2025 and is expected to rise further to 52-53% this year, he said, citing CISA's statistics.

"However, higher-end steel products have not brought higher profits, pointing to the prominent losses suffered by some manufacturers of automotive steel such as non-grain-oriented silicon steel," he heightened. Periodic oversupply of certain high-end grades has triggered price wars as well, making "high-end, low-efficiency" a pain point for some mills who rushed to the niche market, he added.

Steel exports also face mounting challenges from increased trade protection, currency fluctuations and changing overseas demand, Liu projected.

During January-October, China's cumulative finished steel exports reached 95.5 million tonnes, lower by 2.3% on year, according to the latest statistics of the country's General Administration of Customs. "Although China's shipments of steel semis increased substantially this year, semis exports will remain a supplement rather than a major export channel in the future given its low added value," Liu said.

The surplus in supply has exerted downward pressure on Chinese steel prices, which, coupled with higher raw material costs, pushed many domestic steel mills into losses this year, he added.

Mysteel assessed China's average composite steel price year-to-date in 2026 at Yuan 3,458/tonne ($518.7/t) including the 13% VAT, slightly lower by 0.9% from the average price of 2025.

With China's steel demand continuing to contract, the oversupply in the country's steel industry is unlikely to see any marked improvement in the next two or three years, and proactive production cuts by the industry are the only way to alleviate the pressure, Liu stressed.

Source:Mysteel Global