The world’s two most populous countries China and India are a study in contrast when it concerns steel.
The contrast, in many ways stark, will not undergo change in the foreseeable future. First, Chinese steelmaking capacity of between 1.1bn tonnes and 1.15bn tonnes is many times bigger than of India’s
205m tonnes in 2025. Based on the latest Organisation for Economic Cooperation and Development
(OECD) steel report, it is to be inferred that for the growing world surplus capacity impinging on steel
prices, the principal culprit remains the gargantuan Chinese steel industry. This is despite Beijing mandated
phasing out of unviable and environment fouling capacity and new mills allowed to be built strictly
on capacity replacement basis. The world is watching how the Chinese resolve to continue to “strictly
regulate steel production” and prevent emergence of illegal new capacities will work out.
The main points of the OECD report: First, the global steel capacity for a seventh consecutive year at 2.55bn tonnes at 2025 end, left the surplus capacity at 680m tonnes. Second, planned capacity addition
of 109m tonnes in Asia (excluding China) and the Middle East by 2028 will further reinforce the global
steel structural overcapacity. Besides capacity, the other areas of contrast between China and India are
in production and consumption of steel.
Driven by weak internal demand and official regulations, the Chinese steel production fell 4.4% yearon year to 960.81m tonnes in 2025. This happened to be the first time since 2020 that China produced less than a billion tonnes of steel. Nobody will hazard a guess as to when again the country’s steel output will reach or surpass the threshold level of a billion tonnes. Chinese production decline in recent years is seen as a managed issue with Beijing addressing overcapacity in the face of fall in domestic demand, poor working of the industry because of low steel prices and growing tariff and non-tariff barriers that steel exports face. LangeSteel, a Chinese steel information centre, says steel production in China will continue to fall through 2026, but at a comparatively moderate pace of approximately 3% for same considerations as before.
The concern for production staying well ahead of demand and the self-set goal to peak carbon emissions ahead of 2030 and achieve carbon neutrality by 2060 leaves China with no option but to restrain steel output. Globally, steel happens to be among the major polluting industries. Steel’s share in the world anthropogenic GHG (greenhouse gas) is up to 9%.In this context, a Wood Mackenzie official says: “While this has triggered production cuts in key provinces like Shandong and Jiangsu, China’s massive production infrastructure means the country will remain a dominant force in global supply dynamics despite potential output reductions of 240 million tonnes between 2024 and 2050.” As opposed to China where urban infrastructure is extensive and incredibly strong, India, which remains engaged in building a robust infrastructure to support economic growth, promoting housebuilding on a large scale for different income strata and incentivising industrial growth is seeing the world’s fastest steel capacity and consumption growth.
Describing India as a bright spot in the global steel industry, the country’s steel secretary Sandeep Poundrik says: “We are the only country in the world where steel consumption is growing at a very high pace. The domestic steel use has risen from about 95m tonnes to 152m tonnes in the past five years, marking a growth of over 50%.” This happened when the Chinese steel demand in 2025, according to World Steel Association (WSA), was projected to fall by approximately 2%. The WSA forecast shows a “moderation of the downward trend observed since 2021” caused by continuing crisis in the housing market and the country moving away from infrastructure-heavy growth. WSA further says “lingering financial pressures on local governments could constrain infrastructure investments,” slowing steel demand. Demand for steel in an economy of the size of China has got much to do with GDP (gross domestic product) growth and economic priorities. While the economy registered a growth of 5% in 2025 as targeted by Beijing, the point of concern remains the 4.5% growth in the final quarter, slowing from the third quarter’s 4.8% (source: National Bureau of Statistics.)
As the economic headwinds, including the property sector and the associated debt burden, trade tensions
and geopolitical unrest continue to affect the Chinese economy, Wood Mackenzie thinks the Chinese steel
consumption will fall by an average of 5 to 7m tonnes a year over the next decade. In the process, the analytics and research group says: “China’s share in global steel demand is projected to drop sharply from 49% in 2024 to 31% by 2050. Meanwhile, India and Southeast Asia are emerging as growth powerhouses, with India alone projected to triple its demand, raising its market share from 8% to 21% by 2050.”
China will have to contend with its steel industry being left with considerable surplus after meeting
the continuously falling domestic demand, affecting the world trade in the commodity. Steel watchers say
house starts, which is a major steel demand driver in China, is likely to remain on a downward trend in the
current year with the focus shifting to high quality housing development. In that scenario, the construction
steel (long products) demand will suffer a further setback. China has seen one the fastest rates of urbanisation in history with urbanisation rate climbing from 18% in 1978 to nearly 68% by 2024-25 with the urban population now exceeding 920m. Since the national goal is to achieve 70% urbanisation, investment in the area has automatically slowed, so also steel use proportionately. Urban renewal is a continuous process, but steel demand intensity here is much lower than that of traditional infrastructure development.
China being the world’s largest manufacturer and exporter of machinery, including hi-tech ones, where
large volumes of steel, including specialised steel find application, the steel industry is closely watching what will be in store for the machinery sector and also for it in the forthcoming 15th five-year plan covering the period up to 2030. In any case, Chinese steelmakers are confident that steel consumption of the manufacturing sector will remain robust in 2026 like last year, but this will not be enough to fully compensate for the slowing steel demand in the construction sector. How the manufacturing sector will perform and the level of its demand for steel will, however, be linked heavily to export demand. This is because local market is not expected to show any significant demand improvement linked to tepid household income expectations. A point of concern for China and others is the expanding tariff regime in the US extends to products with high steel content, in particular machinery and equipment. Incidentally, the US is the world’s largest importer of machinery.
Armed with capacity resulting in production much in excess of demand within the country, China has emerged too big an exporter of steel. This is of growing concern to countries which own significant steel capacity, such as the US, the 27 member European Union and India. These countries have responded to Chinese steel export salvos with a variety import protective measures, including high tariffs, anti-dumping measures, safeguard duty and quality checks. But then China being a cost-effective steelmaker and widely believed to be a beneficiary of government incentive, it has found a market in the Middle East and Africa, more than compensating for the loss in developed regions. Difficulties in selling in the domestic market in line with production left Chinese mills with no alternative but to raise exports to a record 119.02m tonnes in 2025, up 7.5% over the previous year.
But compulsions to ship out record volumes did not fail Beijing to realise adverse reactions of countries,
specially the ones owning steel capacity, hit by arrivals of subsidised low-cost Chinese steel. This is likely the reason why the Chinese commerce ministry along with the General Administration of Customs introduced end of last year export licensing for certain steel products. Will the directive not limit the flexibility of exports as a market balancing tool and oblige some mills to bring about changes in product mix?
Many China watchers believe the combination of “expected another round of production fall, introduction
of export licensing and the global market further tightening export flows from China” will curb Chinese
steel exports in 2026. The China-based commodity information provider Mysteel confirms that the 2025
high base and increased trade restrictions will be among the principal reasons for a 4.3% decline in the
country’s direct steel exports. At the same time, this year should see China recording a 4% to 5% increase
in indirect steel exports driven by solid global appetite for machinery and equipment, automobiles and
ships. Incidentally, China is the world’s largest shipbuilder enjoying the crown for more than two decades
and a half. The country produces over 56% of global output of ships by deadweight tonnes (DWT).
In the meantime, production discipline and lower cost of two principal raw materials, namely iron ore and metallurgical coal helped the majority of mills reporting to China Iron and Steel Association (CISA) to profitable working. CISA whose members account for 80% to 90% of the country’s steel production says in a report that its member mills made profits of Yuan 96bn ($13.5bn) in the first three quarters of 2025 when operating revenue fell 2.36%. The fall in operating cost at 3.8% aided profitability. So also the shift in product portfolio in favour of flat products, specially hot-rolled coils, which enjoy fairly stable demand in both domestic and foreign markets. Beijing will continue to support the steel industry so that its working remains profitable. The support will take the form of encouraging “larger, efficient and technologically advanced enterprises. Simultaneously, smaller, polluting and inefficient mills will continue to be axed.” Beijing is also ensuring that the industry migrates to greener production methods, including use of hydrogen metallurgy. The message that goes out from the Chinese authorities is that the steel industry, which is going through a long period of restructuring will remain a vital part of the national economy.
Comments are closed, but trackbacks and pingbacks are open.