China Steel Industry Crossroads: 110.7M-Tonne Exports, 2% Demand Drop & Race to 15% EAF Share by 2025

China’s steel industry entered 2025 at a strategic crossroads, balancing domestic oversupply with global environmental obligations. The nation produced approximately 1.005 billion tonnes of crude steel in 2024, marking a 1.7% decline year-on-year, yet it still accounted for 53% of global steel output, according to the World Steel Association, 2024.

Weak property investment and slowing infrastructure spending have weighed on demand, while export volumes surged to around 110.7 million tonnes, the highest since 2015. This divergence has exposed the industry’s reliance on external markets and the limitations of domestic absorption capacity.

At the same time, China faces rising decarbonization pressure under both its MIIT–NDRC Work Plan (2025–2026) and the EU’s Carbon Border Adjustment Mechanism (CBAM). Business leaders must now adapt to a steel economy shaped by production restraint, trade friction, and sustainability mandates.

Domestic Demand Weakens as Oversupply Pressures Intensify

China’s apparent steel consumption is projected to fall by approximately 2% in 2025, extending a three-year decline driven by the property market downturn. Construction—responsible for about one-third of national steel use remains subdued, and public investment has not fully compensated for the gap. Consequently, domestic mills have operated above 85% capacity utilization, sustaining a persistent surplus.

This imbalance has depressed average hot-rolled coil prices by nearly 12% year-on-year, squeezing gross margins below 3%. Even with output cuts mandated in select provinces, overall production remains above equilibrium levels, creating an inventory overhang expected to persist into mid-2025.

To stabilize pricing, regulators are urging coordinated production control among leading mills and tighter supervision of local approvals. If total output is reduced toward 970 million tonnes in 2025, the market could restore price equilibrium by early 2026, supporting a more sustainable profit structure.

Rising Exports Strengthen China’s Global Steel Position

Exports have become the sector’s primary outlet amid weak domestic demand, rising 33% year-on-year in 2024 to reach approximately 110.7 million tonnes. Stainless steel exports alone rose to around 5 million tonnes, reflecting increased demand from Southeast Asia and the Middle East. Exports now account for roughly 11% of China’s total steel production, up from 7% in 2022.

However, the surge has heightened trade risks, as importing countries respond with stricter safeguards. India, Vietnam, and the European Union have intensified anti-dumping investigations, while CBAM threatens to impose carbon levies of EUR 180–200 per tonne from 2026. Such measures could reduce export profitability by USD 20–25 billion annually if carbon intensity remains unchanged.

To mitigate this, Chinese producers are diversifying export destinations and expanding value-added product lines. Maintaining volumes near 105–110 million tonnes in 2025 will depend on balancing foreign demand with compliance readiness, particularly as environmental trade barriers tighten across Europe and emerging markets.

Tightening Carbon Regulations Accelerate China’s Green Steel Transformation

China’s Work Plan for the Steel Industry (2025–2026) targets a structural transition toward cleaner production. The plan requires electric arc furnace (EAF) output to reach at least 15% of national steel production by 2025, compared to just 10% in 2024. It also reinforces a 1.5:1 capacity-replacement rule, ensuring outdated furnaces are retired before new projects commence.

China included steel in its national Emissions Trading Scheme (ETS) starting in 2025, covering around 1,500 steel sites and expanding carbon market coverage to 60% of national emissions. The initial carbon price for steel sector emissions is estimated between USD 10 and 15 per tonne of CO₂, based on verified 2024 emissions.

This pricing scheme internalises carbon costs, incentivising steel mills to invest in electric arc furnace and hydrogen-based direct reduced iron technologies as part of the country’s broader low-carbon transition strategy.

Together, these measures aim to reduce the sector’s carbon intensity by 9% by 2026, equivalent to eliminating over 160 million tonnes of CO₂ emissions annually. For producers, the transition demands large-scale investment but also offers long-term competitiveness under the emerging carbon-adjusted trade regime.

Green Investments and Industry Consolidation Reshape China’s Steel Landscape

Leading steel producers are accelerating green investments to comply with new environmental mandates. In 2024, China Baowu Group, the world's largest steelmaker, launched significant green steel initiatives, including acquisitions of approximately USD 622 million to upgrade Electric Arc Furnace (EAF) facilities and develop hydrogen Direct Reduced Iron (DRI) pilot plants as part of its broader decarbonization strategy.

HBIS Group and Shougang Group also announced a combined investment of hundreds of millions of dollars to modernize low-emission steelmaking facilities and expand hydrogen-based steel production capabilities.

Policy direction favors consolidation to achieve economies of scale in technology adoption. The MIIT–NDRC Work Plan aims to increase the market share of the top 10 producers to at least 30% by 2030, facilitating centralised innovation and enhanced environmental governance. Smaller private mills, many operating below 5 Mt annual capacity, face mounting financial and regulatory pressure.

As per Ken Research, by 2026, consolidation could remove 40–60 million tonnes of inefficient capacity, stabilising supply while boosting the average carbon efficiency of remaining producers. This structural tightening marks a shift from volume-led to quality-driven growth—a necessary evolution for long-term market equilibrium.

Strategic Transition Positions China for Sustainable Steel Leadership

China steel industry in 2025 stands between overcapacity and opportunity. Oversupply continues to pressure prices, while export reliance exposes producers to policy volatility and carbon costs abroad. The path forward lies in disciplined production management and accelerated decarbonization to align with evolving global trade norms.

According to Ken Research analysis, if the sector achieves its 15% EAF output target and trims carbon intensity to around 1.9 tonnes of CO₂ per tonne of steel by 2026, China could protect USD 8–10 billion in export revenue from CBAM-related penalties. The shift toward cleaner, consolidated production will also improve global competitiveness.

Ultimately, China’s challenge is no longer how much steel it produces but how efficiently and sustainably it can produce it. Success in balancing supply, trade, and emissions will determine the steel industry’s profitability and relevance in a decarbonised global economy.