Steel Holds Steady as China Targets Overcapacity

Steel rebar futures held steady above CNY 3,070 per ton, hovering near one-month highs after China reaffirmed its commitment to curb overcapacity in the steel sector, aiming to strengthen the industry’s overall health. Chinese steel mills remain under pressure from persistent oversupply amid a prolonged property downturn, while steel exports are increasingly constrained by protectionist measures in overseas markets. Beijing issued similar pledges during the 2025 policy meetings, though the results were mixed. The country’s steel output fell below 1 billion tons last year for the first time since 2019, although some analysts questioned the reliability of the official figures. China also set a 2026 GDP growth target of 4.5%–5%, the lowest since the early 1990s, as policymakers contend with ongoing deflationary pressures and higher US tariffs.

Steel rebar futures climbed toward CNY 3,070 per ton, nearing four-week highs as Chinese authorities ordered production cuts across northern steelmaking hubs to curb pollution during the annual sessions of the National People's Congress. Under the so-called “blue skies” directive, mills were instructed to reduce blast furnace output by 30% for one week starting March 4 to limit emissions in Beijing during the high-profile political meetings. Tighter supply has provided short-term support to prices, as reduced output typically improves profitability and margins for steel producers. However, demand in top consumer China remained soft following the Lunar New Year holiday, and analysts expect steel consumption to ease in the first half of the year amid persistent weakness in the property sector and cautious industrial activity.

Steel rebar futures fell below CNY 3,060 per ton, giving back recent gains after Chinese authorities instructed mills in Northern China to temporarily scale back operations to curb pollution during the annual sessions of the National People's Congress. Under the so-called “blue skies” directive, mills were required to cut blast furnace output by 30% for one week starting March 4 to limit emissions in Beijing during the high-profile political gatherings. Investors also continued to gauge demand conditions in top consumer China, where economic activity has remained subdued following the Lunar New Year holiday. Analysts expect steel consumption to soften in the first half of the year amid lingering property sector weakness and cautious industrial activity. Meanwhile, the industry is monitoring potential trade repercussions after the US Supreme Court’s ruling on tariffs, which could prompt additional protectionist measures.