China steelmakers head for more production cuts as demand wanes

China is still producing too much steel, setting up the industry for more pain as domestic consumption drops and unprofitable mills reach a tipping point.

Output edged lower in 2024, although it stayed above 1 billion tons for a fifth consecutive year. Deeper cuts will be necessary to align with demand, which is faltering because of the protracted crisis in China’s property market and the changing nature of its economy.

Decades of expansion driven by construction and state investment are at an end, and new growth areas for the industry are not enough to replace those drivers. The government is shifting its focus to greener, hi-tech growth and consumption, which is shrinking steel’s importance to the economy.

“The worst is not over,” said John Chen, Standard Chartered’s regional head of commodities sales in Singapore. “Almost all steel mills are bleeding.”

Chinese research firm Mysteel expects output to sink to less than 900 million tons by 2030. From over 1 billion tons in 2020, Chinese steel consumption could fall below 800 million tons by 2030, according to the base case forecast by Bloomberg Intelligence. Its worst case is a plunge to 525 million tons.

Those kind of predictions have lit a fire under efforts to consolidate the industry, which are likely to speed up this year as mills struggle to maintain cash flow and margins. The sector has lost money for most of the year, while its total debt had climbed to a record 5.1 trillion yuan (US$696 billion) by November, according to the statistics bureau.