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title: The Development of China's Steel Industry Urgently Needs High-end Transformation
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As the end of the year approaches, the steel industry is experiencing a critical stage of structural adjustment and transformation. Although the overall output remains relatively stable, demand continues to be under pressure, inventory levels have risen significantly, and the industry's profit foundation is still fragile. However, amid challenges, some enterprises have achieved counter-trend growth through measures such as focusing on high-end products, optimizing structure, reducing costs and increasing efficiency, providing a new path for high-quality development of the industry.

## (I) Demand Declines, Inventory Pressure Emerges

According to the latest data from the China Iron and Steel Association (CISA), the apparent consumption of steel in China in the first three quarters of 2025 was 649 million tons, a year-on-year decrease of 5.7%. This trend is not a short-term fluctuation, but a continuous change since the "14th Five-Year Plan"—since the peak consumption of 1.04 billion tons in 2020, China's apparent steel consumption has declined for five consecutive years, falling to 890 million tons in 2024, a cumulative decrease of 150 million tons, with an average annual decline of 3.8%.

At the same time, inventory pressure is gradually accumulating. Research reports from Cinda Securities show that as of November 28, 2025, the social inventory of the five major steel varieties reached 10.073 million tons, a significant year-on-year increase of 27.82%; factory inventory was 3.935 million tons, a year-on-year increase of 2.11%. Data from CISA shows that in mid-November, the steel inventory of key statistical steel enterprises was 15.61 million tons, an increase of 3.24 million tons compared with the beginning of the year, an increase of 26.3%, reflecting the phased mismatch between weak end demand and production rhythm.

## (II) Output is Stable with Adjustments, Structural Differentiation Intensifies

From the production side, the steel industry as a whole is operating smoothly. In mid-November 2025, the average daily output of crude steel of key statistical steel enterprises was 1.943 million tons, a slight increase of 0.9% month-on-month; the average daily output of steel was 1.924 million tons, an increase of 2.1% month-on-month. But looking back to October, the country's crude steel output was 72 million tons, a year-on-year decrease of 12.1%, and the cumulative output from January to October was 818 million tons, a year-on-year decrease of 3.9%. This indicates that under policy guidance and market regulation, the trend of the industry actively reducing production continues.

It is worth noting that although the total output has declined, the production and sales ratio of high-end steel products is increasing. A number of listed companies disclosed in their announcements that by increasing the proportion of special steel and high value-added products, they effectively hedged the impact of falling prices of ordinary steel, and some enterprises even turned losses into profits. According to the third quarterly report data, among the 46 steel listed companies that have disclosed their performance, 31 have achieved year-on-year growth in net profit, accounting for 67.39%.

## (III) Profit Improvement but Fragile Foundation, Industry Still in Transformation Pain Period

Xia Nong, vice president of CISA, pointed out at the 21st China Steel Industry Chain Summit that since 2025, the industry has been operating well overall, with significantly improved benefits compared with the same period last year, and achieved a turn from loss to profit in September. However, from a month-on-month perspective, the profit level in September fell sharply compared with August, indicating that the current profit foundation is still not stable, and the industry is still in a stage of "weak recovery and strong differentiation".

This judgment is highly consistent with the current supply and demand pattern: on the one hand, traditional steel-consuming fields such as construction and real estate continue to shrink; on the other hand, emerging application scenarios such as new energy, high-end manufacturing, and steel structure buildings have not yet formed sufficient incremental support.

## (IV) Transformation and Upgrading are the Key to Breaking the Situation, Green and Intelligence Lead the Future

Facing the new development stage of "stock optimization and quality upgrading", CISA emphasizes that steel enterprises must firmly implement the "three determinations and three don'ts" business principles (i.e., determine production based on sales, determine production based on efficiency, determine production based on cash, do not blindly expand production, do not engage in vicious competition, do not sacrifice long-term interests), strengthen industry self-discipline, and curb "involution-style" competition.

Xia Nong put forward five suggestions for high-quality development:

1. Deepen supply-side structural reform, control increments, optimize stocks, and promote merger and restructuring;

2. Promote high-end, intelligent, green, and integrated development, and enhance the competitiveness of the entire industry chain;

3. Strengthen iron ore resource development and scrap steel utilization to ensure industrial chain security;

4. Expand new application scenarios such as steel structure buildings to activate potential demand;

5. Enhance internationalization level and integrate into the global industrial chain.

In terms of green transformation, the industry has made solid progress. As of the end of October 2025, 219 steel enterprises across the country have completed or partially completed ultra-low emission transformation, of which 165 have achieved full-process transformation, covering about 663 million tons of crude steel production capacity, with a total investment of over 310 billion yuan. The average environmental protection operation cost per ton of steel has reached 212.44 yuan, and green has become a hard constraint and new advantage for industry development.

In addition, the construction of extreme energy efficiency is also accelerating. As of mid-November, 21 enterprises have completed extreme energy efficiency acceptance, 10 have been recognized as "double carbon best practice energy efficiency benchmark demonstration enterprises", and 11 others have established energy efficiency benchmarks in key processes or equipment.

## (V) Outlook: Innovation-driven, Boundary Expansion

Li Daokui, Dean of the Institute of Chinese Economic Thought and Practice at Tsinghua University, suggests that steel enterprises should accelerate technological innovation, actively lay out new energy-related material fields, and vigorously promote the application of steel structure buildings. He also calls for strengthening government-enterprise collaboration, promoting internationalization at a more steady pace, and forcing internal reform and capacity improvement through high-level opening up.

It can be predicted that driven by the dual drivers of the "dual carbon" goal and high-quality development, the steel industry is shifting from scale expansion to value creation. Those enterprises that take the lead in completing product upgrading, green transformation, and market expansion will win opportunities in the new round of reshuffle. And the entire industry will reshape its competitiveness in the pain and move towards a more sustainable future.