China’s steel industry in the first half of 2026 was characterized by production cuts and capacity controls, mounting export pressures, and a weak supply-demand balance. Significant structural divergence emerged between production and sales, with the industry remaining in a phase of deep adjustment.
1. Key Production Data
- Crude Steel Production: China produced 499.949 million metric tons of crude steel in January–June, down 3.0% year on year, extending the declining production trend that has persisted since 2020. In June alone, crude steel output reached 83.667 million metric tons, up slightly by 0.4% year on year.
- Pig Iron Production: Pig iron output totaled 426.64 million metric tons in the first half, down 2.8% year on year. June production stood at 71.99 million metric tons, down 0.9% year on year.
- Finished Steel Production: Finished steel output reached 718.78 million metric tons in January–June, down 0.9% year on year. June output was 126.56 million metric tons, broadly unchanged from a year earlier.
- Production Trends at Major Steelmakers: In early June, the average daily crude steel output of major steelmakers stood at 2.083 million metric tons, up 3.8% month on month, while average daily finished steel output fell 6.4% month on month to 1.940 million metric tons. This reflected a divergence in production trends, with crude steel and pig iron output recovering while finished steel production declined.
2. Sales and Export Performance
- Overall Steel Exports: China exported 54.874 million metric tons of steel products in the first half, down 5.6% year on year. June exports totaled 10.320 million metric tons, down marginally by 0.2% month on month, marking a departure from the sustained export growth seen in previous years.
- Exports by Product Category:
- Steel Flat Products: First-half exports totaled 32.24 million metric tons, down 11.2% year on year, making flat products the main contributor to the overall decline in steel exports.
- Steel Bars: Exports reached 10.01 million metric tons, up 10.8% year on year, achieving counter-cyclical growth.
- Angles and Sections: Exports totaled 3.92 million metric tons, up 5.7% year on year.
- Steel Wire Rod: Exports amounted to 1.36 million metric tons, down 5.6% year on year.
- Reasons for Export Pressure: During the first half of the year, more than 20 countries initiated nearly 100 trade-remedy investigations involving Chinese steel products. Meanwhile, the implementation of the EU Carbon Border Adjustment Mechanism (CBAM), together with rising tariff and non-tariff barriers, has significantly increased market-access costs in traditional export destinations.
3. Inventory and Overall Industry Performance
- Inventory Levels: In early June, steel inventories held by major steelmakers stood at approximately 16.87 million metric tons, up 6.6% month on month and relatively high compared with the same period in recent years. This indicates a slowdown in short-term sales and inventory turnover.
- Overall Market Conditions: The domestic steel market maintained a “weak equilibrium” during the first half, accompanied by pronounced structural divergence. Specialty and high-quality steel outperformed commodity steel, while flat products performed better than construction steel. The total profit of large-scale steel enterprises was approximately RMB 31.77 billion, down 25% year on year, with nearly 70% of steelmakers operating at a loss.
- Outlook for the Second Half: Supply-side constraints are expected to become increasingly pronounced in the second half, while the implementation of pro-growth policy measures should provide additional support to demand. As a result, the supply-demand balance may improve temporarily, providing a basis for steel prices to stabilize and potentially rebound in phases.
