MNI: China Steel Demand Seen Weakening in H2

China’s total steel demand is expected to weaken in the second half of 2025 as exports decline from an 11.4% year-to-date rise and domestic consumption remains weak, local analysts told MNI.

Steel demand grew 3% y/y in H1, largely driven by front-loaded export orders ahead of tariff changes, which supported both direct shipments and steel-intensive manufactured goods, said Yan Zhini, ferrous analyst at Nanhua Futures. “These factors will fade in H2, making the demand outlook negative,” Yan added.

Persistent weakness in real-estate activity and the drag from the government’s so-called “anti-involution” policies – designed to curb destructive competition – in manufacturing are also likely to weigh on consumption, Yan said. (See MNI INTERVIEW: Limited PPI Impact)

Export demand, a key support in H1, may ease considerably after August despite China’s relative price advantage and declining supply from other non-China producers, warned Wang Guoqing, chief analyst at the Beijing-based Lange Steel Research Center. 

“Exporters have rushed orders in anticipation of new U.S. tariffs on different trading partners effective from August, which will have a detrimental impact on outbound shipments,” Wang said, noting that the new export order sub-index of steel enterprises surveyed by the Lange Steel Network fell to 48.1% in July, down 2.5 percentage points from June, inline with a slowdown in the global manufacturing outlook, Wang added. 

Still, Wang emphasised that accelerated issuance of special bonds and the creation of incremental fiscal space should support infrastructure spending in H2, providing a degree of offset through stronger demand for construction steel. According to Lange Steel Research Center, construction steel demand reached 164 million tonnes in H1 2025, down 1.6% y/y but narrowing by 8.1 pp from last year’s decline. (See MNI: China's Major Cities To Ease Home Sale Rules)

STEEL PRICES

Steel futures rose to CNY3,341 per tonne on the Shanghai Futures Exchange by end-July, up from CNY2,945 in early June, driven by macroeconomic optimism surrounding the anti-involution policies, according to Vivian Yang, senior ferrous analyst at Mysteel, a Shanghai-based commodity research firm.

“However, sentiment has since reverted to fundamentals,” Yang said, noting futures had retreated to CNY3,156 per tonne by Aug 19.

While sporadic rallies led by policy expectations and market sentiment cannot be ruled out, Yang expects steel prices to remain under pressure in the second half.

Yan added that, in the absence of a significant contraction in overseas demand, the main rebar futures contract should find solid support around CNY2,900 per tonne. Should external demand prove more resilient, however, the upside potential for prices remains considerable, Yan concluded.