- Weak seasonal demand keeps steel prices under pressure
- High inventories and limited output cuts weigh on market
China’s steel prices are expected to stay under pressure in the near term, as demand is unlikely to see any significant recovery during the traditional summer off-season, while the scale of potential supply cuts remains to be seen, according to the latest monthly report of the China Iron & Steel Association (CISA).
Since the beginning of July, frequent extreme weather events, such as torrential rains and scorching heatwaves, have intensified across the country, further hampering outdoor construction activity and leaving little room for the recovery in steel demand.
Meanwhile, the recent decrease in national steel production has been modest, leading to persistently high inventory pressures and a widened imbalance between steel supply and demand.
Steel inventories held by both Chinese steel mills and traders accumulated quickly since early this month. As of 10 July, stocks of the five major steel items comprising rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate held by CISA’s member mills reached 16.77 million tonnes (mnt), up by 3% from the end of June.
During the same period, stocks of the five major steel items at traders’ warehouses across the 21 Chinese cities under CISA’s regular tracking also moved higher by 3.6% to stand at 9.69 mnt.
Steel production among CISA’s member steel mills declined slightly in early July, with their daily crude steel output averaging 2.02 mnt/day, down by a tiny 0.1% compared with late June, according to the report.
Domestic steel mills are facing mounting pressure to make profits, as resilient raw material prices have kept their input costs high, while sharply weaker end-user demand has dragged steel prices lower, eroding their profitability.
On the macroeconomic front, the escalating situation in the Middle East has once again weighed on global economic growth prospects, as energy prices face sharp fluctuations, and the disinflation process could therefore be derailed, CISA noted.
In the latest World Economic Outlook of the International Monetary Fund released on 8 July, global economic growth for 2026 has been lowered to 3%, down by 0.1% point from the Fund’s April prediction, as reported.
However, China’s economic growth is expected to remain broadly resilient. The association pointed out that the World Bank released its latest China Economic Update in Beijing on 7 July, projecting that China’s economy may grow by 4.4% in 2026, unchanged from its previous forecast issued in December last year.
Besides, the People’s Bank of China will continue to prudently carry out a moderately loose monetary policy, which will provide policy support and bolster macro-level confidence for the steel industry.
China’s steel market is expected to enter a new phase characterized by reduced volume and improved quality, and the phase-out of obsolete capacity is likely to accelerate, CISA noted.
In mid-June 2026, China’s National Development and Reform Commission and four other ministries jointly announced a three-year energy-saving and carbon-reduction retrofit for nine key industries including steel, aiming to raise the share of benchmark-level production capacity by an average of 20 percentage points and largely phase out sub-baseline capacity by the end of 2028.
Smaller steel mills unable to meet the industry’s energy efficiency standards will struggle with high upgrade costs and financing constraints, leaving them vulnerable to market exit or consolidation through mergers and acquisitions, CISA pointed out in the report.
The report urged domestic steelmakers to actively implement national industrial policies, align production with crude steel control requirements, and avoid exacerbating the supply-demand imbalance to mitigate operational risks.
Note: This article is published as part of a content exchange agreement between Mysteel Global and BigMint.
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