China’s steel mills have led a significant downturn in the country’s building materials production, with June output falling 9.2% year-on-year to 83.2 million tons—the weakest first half since 2020. This decline underscores the ongoing challenges facing China’s construction and manufacturing sectors.
The downturn is primarily attributed to the prolonged slump in the real estate market, which has dampened demand for construction steel. Despite some mills reporting profits exceeding 100 yuan per ton, many are hesitant to increase production due to high inventory levels and seasonal demand slowdowns. For instance, in regions like Sichuan and Chongqing, steel mills are operating at reduced capacity, focusing on specialty products rather than construction materials. Additionally, adverse weather conditions, including high temperatures and frequent rainfall, have further hindered construction activities, leading to a slowdown in downstream procurement.
While iron ore imports surged to near-record levels in June, reaching approximately 110 million tons, this increase is driven by strategic inventory restocking rather than a rebound in steel production. Analysts caution that the divergence between rising imports and declining steel output may not be sustainable, as it could lead to oversupply and further price pressures in the steel market.
Looking ahead, the outlook for China’s steel industry remains uncertain. The government’s plans to cut crude steel output by 5% in 2025 face challenges due to economic pressures and the industry’s profitability. Enforcement of these cuts is expected to be uneven, with some regions and mills already exceeding their production targets.
