SunSirs: China's Steel Market Shows Volatile Yet Firm Performance in January 2026

In December 2025, amid relatively stable global economic recovery, continued decline in China's economic indicators, divergent supply release efforts, seasonal slowdown in market demand, and resilient cost support, the domestic steel market exhibited range-bound volatility. Data indicates that by the end of December, the national composite steel price stood at 3,509 RMB per ton, down CNY4 per ton from the previous month—a 0.1% month-on-month decline and a 5.3% year-on-year decrease. On a monthly average basis, December's composite steel price averaged CNY3,515 per ton, up CNY15 per ton from November, representing a 0.4% increase.

Looking ahead to January 2026, the domestic steel market will continue to be influenced by multiple factors. Policy-wise, both favorable and restrictive measures coexist. The policies outlined at the Central Economic Work Conference—expanding domestic demand, countering internal competition, and stabilizing the real estate sector—will enter their implementation phase. This coincides with the new steel export licensing policy taking effect on January 1 and the EU Carbon Border Adjustment Mechanism (CBAM) formally coming into force. Market expectations are diverging amid policy guidance and rule restructuring. From the demand perspective, construction sites gradually halt operations due to seasonal weather conditions, leading to a seasonal weakening in construction steel demand. Meanwhile, manufacturing steel demand maintains resilience, intensifying the divergence in demand structure. On the supply side, output remains constrained by environmental production restrictions and mill maintenance, sustaining a “weak equilibrium” in market supply and demand. The domestic steel market is expected to exhibit a fluctuating yet generally firm trend in January 2026.

Key factors influencing domestic steel prices in January 2026 include:

I. Continued Weakening of Downstream Construction Material Demand

From January to November 2025, cumulative fixed-asset investment nationwide continued its year-on-year decline, falling 2.6% compared to the same period last year. The rate of decline accelerated by 0.9 percentage points from the previous month. The widening contraction in real estate investment, coupled with slowing growth in infrastructure and manufacturing investment, remains the primary driver behind the further decline in overall fixed-asset investment. By sector, all three major investment categories continued to weaken year-on-year. Infrastructure investment (including power) grew by 0.13% cumulatively, with the growth rate slowing by 1.38 percentage points from the previous month. Manufacturing investment increased by 1.9% year-on-year, with the growth rate slowing by 0.8 percentage points from the previous month. Real estate development investment continued to decline, falling by 15.9% year-on-year, with the rate of decline widening by 1.2 percentage points from the previous month.

Regarding changes in construction steel demand in December, as winter weather progressively set in across northern and southern regions, outdoor construction activities faced constraints moving southward, leading to a noticeable decline in building material transactions. The average daily transaction volume of construction steel in 20 key cities reached 119,800 tons in December, decreasing by 5,300 tons from the previous month—a month-on-month drop of 4.2% and a year-on-year decline of 11.8%.

Despite continuous policy easing in the real estate sector since 2025, core indicators related to steel demand—such as investment and construction activity—showed year-on-year declines from January to November, exerting sustained pressure on demand for construction steel (rebar, wire rod, etc.). Meanwhile, weak signals of demand recovery in property sales and funding further limit willingness to resume operations and initiate new projects. This makes it difficult to generate effective incremental steel demand in the short term, hindering the recovery of steel demand.

In 2025, China's fiscal policy became more proactive. Monitoring data indicates that by the end of December 2025, the nationwide issuance of new special bonds reached CNY4.5527 trillion , exceeding the annual issuance target and representing a 13% increase compared to 2024. However, since the beginning of this year, special bond funds have been diverted from traditional projects. A significant proportion of these funds has been allocated to non-traditional infrastructure sectors such as land reserves, commercial property acquisitions, and debt repayment, resulting in a weaker direct pull effect on steel demand. This has led to a decline in investment in some traditional infrastructure sectors. From January to November 2025, investment in the road transport industry decreased by 4.7% year-on-year, and investment in public facility management fell by 6.2% year-on-year. This has led to a gradual slowdown in infrastructure investment growth. Excluding power sector investment, the year-on-year decline persists, weakening the floor effect on construction steel demand. In January 2026, as winter deepens across northern and southern China, the steel market will gradually enter its off-season. Construction steel demand will continue to weaken, facing downward pressure both month-on-month and year-on-year.

II. Cumulative Output of Non-Building Materials Remains on an Upward Trajectory

In November 2025, amid intertwined economic structural contradictions, deepening off-season effects, markedly unstable market transactions, and resilient cost support, the domestic steel market exhibited range-bound fluctuations as steel mills continued to scale back production capacity utilization. According to data released by the National Bureau of Statistics, national pig iron output in November reached 62.34 million tons, down 8.7% year-on-year, with the year-on-year decline rate widening by 0.8 percentage points. National crude steel output stood at 69.87 million tons, down 10.9% year-on-year, with the year-on-year decline rate narrowing by 1.2 percentage points (see Figure 2). Cumulative production figures for January-November show national pig iron output at 774.05 million tons, down 2.3% year-on-year, while crude steel output reached 891.67 million tons, down 4.0% year-on-year. Annual crude steel production for 2025 is projected to reach approximately 963 million tons.

Regarding steel product output, monthly production continued to decline year-on-year, while cumulative output maintained year-on-year growth. In November, China's steel product output reached 115.91 million tons, down 2.6% year-on-year, with the decline rate widening by 1.7 percentage points. From January to November, cumulative steel product output totaled 1,332.77 million tons, up 4.0% year-on-year. By product type, November production showed divergent year-on-year trends: rebar and wire rod output declined significantly month-on-month, while welded steel pipe production shifted from growth to contraction. Cumulatively, rebar production saw an accelerated year-on-year decline, wire rod output reversed its growth trajectory, and plate products maintained an upward trend (see Table 1).

III. Social Steel Inventories May Gradually Rebound in Later Periods

In December 2025, steel social inventories showed a gradual downward trend. Data indicates that by the end of December, steel social inventories across 29 key cities stood at 7.894 million tons, down 11.5% month-on-month but up 19.0% year-on-year. Among these: - Construction material social inventories totaled 3.054 million tons, down 20.6% month-on-month but up 9.0% year-on-year; Sheet steel inventories stood at 4.841 million tons, down 4.5% month-on-month but up 26.3% year-on-year (see Figure 3). As the off-season deepens and the Spring Festival approaches in January 2026, steel inventories are expected to gradually rebound.

IV. China's Steel Exports May Face Increasing Pressure

China's monthly steel exports in November 2025 showed renewed growth both month-on-month and year-on-year. According to General Administration of Customs statistics: - Exports: China exported 9.98 million tons of steel in November, up 7.6% year-on-year, reversing the previous month's decline. - January-November: Steel exports totaled 107.717 million tons, up 6.7% year-on-year, with the growth rate accelerating by 0.1 percentage points from the previous month. On the import side, China imported 496,000 tons of steel in November, a year-on-year increase of 4.9%, marking a turnaround from the previous month's decline. From January to November, China imported 5.541 million tons of steel, a year-on-year decrease of 10.5%, with the decline narrowing by 1.4 percentage points compared to the previous month.

Since late November, trade remedy investigations against the steel industry have continued. On November 25, Australia initiated an anti-dumping investigation on welded wire mesh products from China; On November 28, South Korea initiated an anti-dumping investigation on Chinese galvanized cold-rolled steel; On December 11, the EU launched an anti-dumping investigation on Chinese silicomanganese steel wire; On December 17, South Africa initiated an anti-dumping investigation on Chinese color-coated steel sheets. Earlier anti-dumping rulings are also being issued (see Table 2), and the implementation of relevant tariffs will continue to constrain exports of related steel products from China.

On December 9, 2025, the Ministry of Commerce and the General Administration of Customs jointly announced that, effective January 1, 2026, 300 steel products under customs commodity codes (covering the entire industrial chain including raw materials, billets, hot-rolled, and cold-rolled products) will be included in the export license management catalog. This policy is not an isolated measure but aligns with the guiding principle of “strengthening steel product export management and optimizing the export product structure” outlined in the “Steel Industry Growth Stabilization Work Plan (2025-2026).” It marks China's steel exports formally moving beyond the extensive era of “volume-driven growth” and entering a new phase of “quality breakthrough” centered on quality and efficiency.

Currently, China's steel export order index has re-entered contraction territory, while global manufacturing indices show slight declines. Amid complex and volatile external conditions, external demand for manufacturing has stabilized but remains weak. Concurrently, the sustained recovery in global crude steel production, coupled with trade frictions and related tariff policies, continues to constrain China's steel exports. However, China's steel exports retain price competitiveness, and the diversification of export channels under the Belt and Road Initiative offers avenues to circumvent the export restrictions set to take effect in 2026.

Currently, China's steel export order index has re-entered contraction territory, while the global manufacturing index also shows a slight downward trend. Affected by complex and volatile external conditions, external demand in the manufacturing sector has stabilized somewhat but remains weak. Concurrently, the sustained recovery in global crude steel production, coupled with trade frictions and related tariff policies, continues to constrain China's steel exports. However, China's steel exports retain price competitiveness, and diversified export channels under the Belt and Road Initiative have driven short-term export surges to circumvent upcoming export restrictions starting in 2026. China's steel exports in December 2025 are projected to remain between 9-10 million tons. For the full year, China's steel exports in 2025 are expected to reach 117 million tons, representing a year-on-year increase of approximately 6%. The new steel export licensing policy taking effect in China on January 1, 2026, alongside the EU's Carbon Border Adjustment Mechanism (CBAM), will exert some restraint on China's steel exports in 2026.

V. Weakened Cost Support as Third Round of Coke Price Cuts Takes Effect

Since December 2025, iron ore prices have fluctuated. By the end of December, the price of 66% grade dry-basis iron concentrate in Tangshan stood at 980 RMB/ton, down 35 RMB/ton from the previous month. For imported iron ore, the market price of Australian 61.5% grade fines at Rizhao Port was 790 RMB/ton, a decrease of 5 RMB/ton from the end of November. On average, imported iron ore prices fluctuated in December. The average price of 66% dry-basis iron concentrate in the Tangshan region was CNY985 per ton, down CNY 29 per ton from the previous month. For imported iron ore, the average market price of Australian 61.5% fines at Rizhao Port was CMY791per ton, up CNY 3 per ton from the previous month.

Regarding coke, coke prices underwent three rounds of price reductions in December. By the end of December, the price of Grade 2 metallurgical coke in the Tangshan region stood at CNY 1,380 per ton, down CNY 150 per ton from the end of the previous month. On average, the price of Grade 2 metallurgical coke in the Tangshan region in December was CNY 1,440 per ton, a decrease of CNY 60 per ton from the previous month.

For scrap steel, prices showed an upward trend with fluctuations in December. By the end of December, heavy scrap prices in Tangshan reached 2,250 RMB/ton, up 20 RMB/ton from the previous month. However, the monthly average price for heavy scrap in Tangshan was 2,235 RMB/ton, down 20 RMB/ton from the previous month.

Driven by the steady decline in average raw material costs, the monthly average cost level shifted downward, weakening cost support for steel prices. Monitoring data indicates that the Lange Pig Iron Cost Index, calculated using raw materials purchased in December, stood at 106.6, down 1.4% from the same period last month. The average tax-exclusive cost of plain carbon square billets decreased by CNY 29 compared to the previous month, representing a 1.1% month-on-month decline.

These factors may exert some downward pressure on the domestic steel market in January 2026. However, as the year draws to a close and the new year begins, positive expectations for 2026 macroeconomic policies continue to emerge. On the supply side, crude steel production quotas will be maintained over the next five years, with strict prohibition of illegal new capacity additions to promote the survival of the fittest. Regarding fiscal and monetary policies, a more proactive fiscal policy will be pursued to maintain necessary fiscal deficits, total debt levels, and expenditure volumes while optimizing the fiscal expenditure structure. Monetary policy will remain moderately accommodative, prioritizing stable economic growth and reasonable price recovery. Flexible and efficient use of policy tools such as reserve requirement ratio cuts and interest rate reductions will ensure ample liquidity and smooth monetary policy transmission. Furthermore, as the opening year of the 15th Five-Year Plan period and with regional 15th Five-Year Plan proposals being released, with local “Two Sessions” continuously releasing implementation policies, market optimism has been somewhat boosted. Futures and spot market prices have shown resilience and a gradual recovery trend. Driven by policy expectations and the steel market's “weak equilibrium,” the domestic steel market in January 2026 is expected to exhibit a fluctuating yet generally firm trend.

However, attention must be paid to the short-term impact of new export policies. The export license system, effective January 1, 2026, represents the most direct new variable that month. As enterprises adapt to the new procedures, export order processing delays or short-term hesitation may occur, affecting steel outflows and indirectly increasing domestic supply pressure. On the supply side, the outlook also faces uncertainty. Crude steel production typically rebounds to relatively high levels in January and February each year. Given the current relatively weak market demand environment, the “weak equilibrium” between supply and demand may be disrupted.

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