Steel Approaches Multi-Month Highs

Steel rebar futures climbed above CNY 3,150 per ton, nearing their highest levels since August last year as China moved to curb overcapacity amid weak demand. Higher raw material costs, driven by rising ocean freight rates and elevated energy prices from the Iran war, have also squeezed steel mill margins, prompting production cuts. Recent data showed Chinese steel output fell 3.6% to about 160 million tons in the first two months of the year, reflecting both a seasonal slowdown tied to the Lunar New Year holiday and pollution controls ahead of March’s annual legislative meetings. China’s steel sector remains in structural decline as the economy matures, leading to weaker construction activity, further exacerbated by the prolonged property crisis. The country’s steel output dropped below 1 billion tons last year for the first time since 2019.

Steel rebar futures held steady around CNY 3,140 per tonne, hovering near seven-week highs after data showed Chinese steel output fell 3.6% to about 160 million tons in the first two months of the year as mills curtailed production to offset weak demand. The period also marks a seasonal slowdown for steelmakers due to the Lunar New Year holiday and pollution controls ahead of annual legislative meetings in March. China’s steel sector has been in structural decline as the country’s economy matures, leading to reduced construction activity, further worsened by the prolonged property crisis. Earlier this month, economic planners at the National People's Congress signaled plans for orderly reductions in steel capacity. Beijing made 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.

Steel rebar futures climbed above CNY 3,140 per ton, hitting six-week highs as China renewed its pledge to support the steel sector by curbing excess capacity. Economic planners at the National People’s Congress signaled plans for orderly reductions in steel capacity, a move that could lift steel prices and improve profit margins. Chinese steel mills continue to face pressure from persistent oversupply amid a prolonged property sector downturn, while steel exports are increasingly constrained by protectionist measures abroad. Beijing issued similar pledges during the 2025 policy meetings, though the outcomes 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 grapple with ongoing deflationary pressures and higher US tariffs.