Posted on 30 Jan 2026

Both steel supply and demand in China are expected to remain weak in 2026, with crude steel output and apparent consumption projected to fall by 1.1% and 0.9% respectively from 2025, Mysteel predicts in the latest annual report.

The expected decline in crude steel output is primarily driven by tighter production capacity regulation and the pursuit of carbon peaking and carbon neutrality goals through a series of policy measures, according to the report.

For example, in late October 2025, China's Ministry of Industry and Information Technology (MIIT) released a draft of a more stringent steel capacity swap plan for public comment. The draft stipulates that the old-for-new swap ratio for both ironmaking and steelmaking capacity must be at least 1.5:1. This means that decommissioned capacity must be at least 1.5 times the size of any newly built capacity, effectively curbing the potential for new capacity additions.

In addition, China's steel industry was formally incorporated into the national carbon emission trading scheme (ETS) in last March, a move expected to increase domestic steelmakers' carbon costs.

On the demand side, the slight decline forecast for 2026 will stem from continued weakness in the construction sector. In the property market, recovery may hinge on the timing and intensity of policy support. The real estate sector is expected to remain in a bottoming-out phase this year.

Infrastructure, however, is expected to continue playing a supportive role in steel demand this year.

Local government bond issuance plans released for the first quarter of this year extend the policy approach of "balancing stable growth and risk prevention," indicating that overall funding supply in the first quarter may remain relatively ample. This should help stabilize investment conditions at the start of the year.

The manufacturing industry is expected to continue growing, though potentially at a slower pace.

In 2026, China's domestic automobile sales growth is forecast to slow, mainly due to the phase-out of the purchase tax incentive for new energy vehicles (NEVs), which will shift from full exemption to a halved rate. By contrast, overseas markets for Chinese automobiles are expected to remain resilient, supported by strong demand in emerging economies and continued growth in NEV sales, Mysteel report said.

The construction machinery sector is also expected to maintain on-year growth in 2026, underpinned by domestic fiscal support for equipment renewal and consumer goods trade-in programs, as well as ongoing infrastructure expansion in overseas markets.

For instance, China's domestic excavator sales are forecast to rise by 9.7% on year in 2026, while export volumes are expected to increase by 2.8% from 2025, according to the report.

On the export front, China's direct steel exports are projected to decline by 4.3% on year in 2026, mainly due to the high base in the previous year and the impact of global anti-dumping measures and trade restrictions.

However, the decline is expected to be modest, supported by a relatively stable relationship between China and the US. In addition, the Federal Reserve's ongoing interest rate cut cycle is likely to stimulate global demand, providing supplementary support for China's steel exports.

Chinese steel exporters' efforts to diversify markets are also expected to help cushion the impact of tariffs.

On the other hand, Mysteel projects China's indirect steel exports to maintain strong growth of 15% on year in 2026, largely driven by improved export performance in downstream industries.

Mysteel also forecasts that major Chinese steel prices in 2026 are likely to be slightly higher than in 2025.

For example, the average price of HRB400E 20mm rebar in Shanghai is expected to rise by 1.5% on year to Yuan 3,300/tonne ($475/t), including 13% VAT. The average price of Q235 4.75mm hot-rolled coil (HRC) in Shanghai is forecast to increase by 1.5% on year to Yuan 3,380/t, VAT included.

Source:Mysteel Global

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