China Steel Oversupply Could Persist for 2–3 Years
China's steel industry could remain under pressure from excess supply for another two to three years because steel consumption is falling faster than production, according to China Iron and Steel Association Vice President Liu Andong.
- January-September crude steel output fell 2.9% year over year.
- Apparent steel consumption fell faster, declining 3.8%.
- Manufacturing is expected to account for 52–53% of steel consumption in 2026.
- January-October finished steel exports fell 2.3% y/y to 95.5 million tonnes.
- CISA says proactive production cuts are necessary to ease the supply-demand imbalance.
MONTREAL (SteelPrices): China's steel industry is entering a deeper adjustment period as mills continue producing more steel than the domestic market can comfortably absorb.
China Iron and Steel Association Vice President Liu Andong said the imbalance is unlikely to improve significantly over the next two to three years unless producers make more aggressive cuts to output.
Speaking at the 17th Ferrous Value-China Summit in Xiamen on November 12, Liu said crude steel production is declining, but not quickly enough to match the fall in consumption.
During January-September 2026, China's crude steel output fell 2.9% year over year, while apparent steel consumption declined by a sharper 3.8%.
Demand Is Changing, Not Simply Disappearing
The problem is not only how much steel China consumes. It is also what type of steel the market needs.
Traditional construction-related demand has weakened, while manufacturing is taking a larger share of overall steel consumption.
According to CISA data cited by Liu, manufacturing accounted for around 42–43% of steel consumption in 2020 and 51% in 2025.
That share is expected to increase further to 52–53% in 2026.
The shift is pushing mills toward flat products, automotive steel, electrical steel and other higher-value grades.
Higher-End Steel Does Not Automatically Mean Higher Profits
Liu warned that the move toward more specialized products has created another problem: too many mills can enter the same higher-value market at the same time.
When that happens, supply can again exceed demand and trigger aggressive price competition.
He pointed to products such as non-grain-oriented silicon steel used in automotive applications, where some producers have suffered losses despite operating in what is considered a higher-end segment.
CISA described this problem as "high-end, low-efficiency" production: mills invest in more sophisticated products, but competition becomes so intense that profitability remains weak.
The Problem Is No Longer Just Too Much Steel
China's steel industry is trying to solve oversupply by moving away from basic construction steel and toward higher-value products. But CISA's warning shows that changing the product mix does not automatically fix the underlying problem.
- Crude steel output: -2.9% y/y in January-September
- Apparent consumption: -3.8% y/y
- Manufacturing share: expected at 52–53% in 2026
- Finished steel exports: 95.5 million tonnes, -2.3% y/y in January-October
- Mysteel composite steel price: Yuan 3,458/t, -0.9% from the 2025 average
In simple terms, demand is shrinking faster than production. Mills are trying to move into products with better margins, but if too many producers chase the same niche, that market can become oversupplied too.
That is why CISA is emphasizing production discipline rather than relying only on exports or product upgrades to rebalance the industry.
Exports Are Becoming a Less Reliable Outlet
Exports have helped Chinese mills move large volumes of steel into overseas markets, but that route is becoming more difficult.
China exported 95.5 million tonnes of finished steel during January-October, down 2.3% from the corresponding period of 2025, according to customs data.
Liu said exporters are facing stronger trade protection, exchange-rate volatility and changing overseas demand.
China has also increased exports of semi-finished steel products during 2026.
However, Liu said semis are likely to remain a supplementary export channel rather than becoming the industry's main outlet because they carry lower added value.
Steel Prices Reflect the Supply Pressure
China's persistent excess supply has continued to weigh on steel prices.
Mysteel assessed China's average composite steel price for 2026 year to date at Yuan 3,458 per tonne ($518.7/t), including 13% VAT.
That was 0.9% below the average level recorded in 2025.
The price weakness has combined with higher raw-material costs at various points during the year to squeeze mill margins and push some producers into losses.
The issue is particularly difficult because lower steel prices do not necessarily force production down immediately. Mills may continue operating to preserve market share, maintain cash flow or cover fixed costs.
Also Read
- China Steel Industry Shifts Toward Higher-Value Products
- China Steel Exports Fall 6.1% to 9.85M Tonnes in October
CISA Says Production Cuts Are the Main Solution
Liu's conclusion was direct: China's supply-demand imbalance is unlikely to improve substantially over the next two or three years if steelmakers continue producing more material than the market needs.
He said proactive production cuts across the industry are the main way to reduce that pressure.
The warning reinforces a broader message already coming from Chinese policymakers and industry leaders: the next stage of China's steel-market adjustment is likely to depend less on increasing output and more on controlling capacity, matching production to demand and improving profitability.
For steel buyers and producers outside China, the issue also matters internationally. China's production discipline affects export volumes, raw-material demand and competitive pressure across Asia, Europe and other major steel markets.
Source: Mysteel Global, citing remarks by China Iron and Steel Association Vice President Liu Andong at the 17th Ferrous Value-China Summit.
