Chinese Steelmakers Boost Profitability Amid Capacity Cuts

Chinese Steelmakers Boost Profitability Amid Capacity Cuts

Chinese steelmakers have significantly improved profitability in the first half of 2025, thanks to strategic capacity reductions and falling raw material prices. According to the National Bureau of Statistics of China (NBS), profits in ferrous metallurgy soared nearly 14 times year-over-year. This rebound comes after a challenging 2024 marked by real estate market struggles and oversupply.

Demand growth, especially in automotive and engineering sectors, supported this profitability surge. Meanwhile, steel output declined to its lowest level since 2020 due to ongoing production cuts across many plants. Bloomberg Intelligence reports domestic steel consumption increased by 4.3%, despite weak construction demand. Export volumes also continued to rise despite global trade barriers.

Capacity cuts remain central to China’s steel profitability. Data shows steel production fell 9.2% year-over-year in June, marking the third consecutive month of decline. UBS forecasts that over 60% of Chinese steelmakers are profitable, double the number from mid-2024. However, rising raw material costs, particularly coking coal, could threaten profit stability going forward.

Capacity Cuts Drive Profitability in Chinese Steel Industry

China’s steel industry benefits from efforts to curb overcapacity and cut production volumes. These measures reduced supply, which, combined with softer raw material costs, pushed profit margins higher. Capacity controls, although still developing, have already led to record low steel output in the first half of 2025. This environment fosters a more balanced market and improves pricing power for producers.

Demand and Export Trends Support Chinese Steelmakers

Growing demand from the automotive and engineering sectors partly offsets construction weakness in China. Domestic steel consumption rose 4.3% in the first half of the year, while exports continue to expand despite tariff and trade challenges globally. Notably, large infrastructure projects, such as the hydroelectric power plant in Tibet, may further stimulate steel demand in coming years.

SuperMetalPrice Commentary:

Chinese steelmakers’ profitability recovery highlights the importance of supply-side reforms amid evolving market conditions. The ongoing capacity cuts create a more stable steel market with improved margins. However, rising costs for coking coal and other raw materials remain key risks. Market participants should watch how Beijing balances capacity controls with demand stimulation. Additionally, global trade dynamics and infrastructure investments will shape steel industry trajectories in 2025 and beyond.