Value Equilibrium—A 2026 Outlook for China’s Steel Market

From December 19 to 21, 2025, the “2026 Steel Market Outlook and ‘My Steel’ Annual Conference” will be held grandly in Shanghai.

At the thematic conference on December 21, Wang Jianhua, Chief Analyst of Steel Products at Shanghai Steel Union, delivered a keynote speech titled “Value Equilibrium—A Review and Outlook of China’s Steel Market.”

Wang Jianhua, Chief Analyst at Shanghai Steel Union Steel Materials

Looking back at the Chinese steel market in 2025, despite a significant drop in coal prices and stronger-than-expected export performance that helped the steel industry “hold onto its value,” the sector has also had to trade price for volume, resulting in persistently falling prices and a supply-demand situation that remains uncertain and volatile.

Looking ahead to 2026, Wang Jianhua believes it will be a year of “value equilibrium,” characterized by six key features: a balanced U.S.-China rivalry, a balance between external and domestic demand, a balance between investment and consumption, a balance between demand and supply, equilibrium among industrial chains, and balanced regional development.

On the macro level, in 2026, the global economy will be caught between conflicting forces—moving forward and backward simultaneously. Domestic fixed-asset investment is expected to grow by 2.4%, while the deficit-to-GDP ratio will remain around 4%. The broad-based deficit could reach approximately 12 trillion yuan. The real estate sector still has room to decline, but it is likely to bottom out and begin to recover. Infrastructure investment will continue to play a crucial role in providing economic support, though its resilience is weakening.

Regarding overseas demand, the impact of policy changes on steel exports cannot be overlooked. On the one hand, the export licensing and management system will make steel exports more compliant. On the other hand, with the implementation in 2026 of overseas anti-dumping arbitration and Europe’s carbon border adjustment mechanism, domestic steel exports are expected to decline by 19 million tons.

On the supply and demand front, steel supply constraints are expected to tighten somewhat in 2026, driven by factors such as ultra-low emission upgrades, the introduction of a three-tier energy consumption system, carbon quota management, and the steady advancement of efforts to combat excessive internal competition. The decline in exports will put downward pressure on the domestic market, prompting adjustments in production. In recent years, some enterprises have continued to suffer losses, and their cash flow pressures will no longer be able to sustain production. Overall, we expect national crude steel output to decline slightly in 2026, and the steel supply and demand balance is likely to achieve a weak equilibrium.

In terms of costs, the average price of iron ore is expected to fall below US$95 by 2026, while the average price of coking coal may rebound by more than 10%. Steel mills’ environmental protection costs are likely to increase to some extent.

In addition, the cyclical impact deserves attention: the macroeconomic cycle is showing a weak recovery, the financial cycle is witnessing further improvement in liquidity, and the inventory cycle may be entering a phase of proactive restocking. The restocking cycles across upstream and downstream sectors, as well as domestically and internationally, are resonating with each other. Meanwhile, the price cycle is rebounding, all of which are providing some degree of support for the steel price rebound.

Taking into account the combined effects of macroeconomic factors, supply and demand, costs, and cyclical trends, we neutrally expect that the average price of steel may see a slight rebound in 2026. However, whether this rebound can actually materialize will depend on steel mills’ ability to adjust their supply.

Faced with a complex market environment, Wang Jianhua suggests that China’s steel industry should seize control of resilience nodes in the supply chain, break through bottlenecks in raw materials, deeply cultivate regional markets to avoid nationwide homogeneous competition, grab emerging demand segments, capitalize on the turning point toward intelligent upgrades, and seize the window of opportunity for green transformation. It must also secure a leading position in talent and technology, overcome the dilemma of technological dependence, gain a cost advantage, extract profits from “ultra-high efficiency,” secure pricing power for high-end products, capture brand premium space, take the lead in the industrial chain, shift from intermediate processing to ecosystem control, and strengthen risk prevention and control capabilities.

Looking ahead to medium- and long-term development, Wang Jianhua believes that during the 15th Five-Year Plan period, the steel industry should pursue “both internal and external improvements.” We should actively promote capacity management, implement rational production control, strengthen joint restructuring, shift from simply exporting products to engaging in overseas operations, and participate in the construction of global value chains through a dual-circulation strategy via targeted initiatives. Meanwhile, individual enterprises should proactively accelerate their transformation, adjust their product structures, place greater emphasis on brand marketing, foster diversified development both domestically and internationally, and collaborate with upstream and downstream players along the industrial chain for mutual growth and symbiosis.