China has announced plans to reduce its steel output [1], in an effort to address overcapacity and enhance profitability. The decision, revealed at the National People’s Congress, aims to restructure the country’s steel industry, which has been grappling with a prolonged property market downturn and mounting trade frictions. However, the announcement didn’t cover any interventions to address the sector’s overcapacity.
The National Development and Reform Commission (NDRC) stated that the government would promote industry restructuring through output reduction. Although specific targets were not disclosed, market speculation suggests a potential reduction of up to 50 million tons of crude steel annually.
China, the world’s largest steel producer and consumer, has faced criticism for flooding global markets with cheap steel, leading to trade disputes with several countries. The latest move is expected to ease the glut and restore profitability at steel mills, which have struggled with declining earnings.
The report said “We will introduce policies and measures for resolving structural problems in key industries and end the phenomenon of rat-race competition through industrial regulation and upgrading.”
The announcement has already impacted global markets, with prices of steelmaking ingredients such as iron ore falling. Iron ore futures in Singapore dropped 1.3% to $99.55 per ton, while yuan-priced futures in Dalian lost 1%.
This decision comes nearly a decade after President Xi Jinping launched his first supply-side reforms of the steel industry. The new measures, which link steel production to carbon emissions, are expected to help China meet its climate goals.
The restructuring is also anticipated to reduce the dumping of cheap steel into markets like India, which has been a major concern for domestic steel companies. Shares of Indian steel stocks surged following the announcement, with companies like Tata Steel and Steel Authority of India Limited (SAIL) seeing significant gains.
As China continues to navigate its economic challenges, the steel output cuts represent a crucial step towards a more sustainable and profitable industry.
Sources:
[1] China Announces Plans for Steel Output Cuts to Restructure Industry https://www.reuters.com/markets/commodities/china-continue-crude-steel-output-cut-2025-2025-03-05/