The profitability of the Chinese steel industry began to recover in June 2025 and, according to analysts, may grow faster in the second half of the year if Beijing implements plans to reduce excess capacity. This was reported by Bloomberg.

According to the National Bureau of Statistics of China (NBS), in the first half of the year, the profits of ferrous metallurgy enterprises increased almost 14 times on an annualized basis, albeit due to the very low base in 2024. Profits in June were supported by reduced supply and weaker raw material prices compared to finished products.

The steel industry has had a rough time because of the crisis in China’s real estate market, which has traditionally been the main driver of demand. Because of this, it’s been at the center of the government’s antitrust campaign to curb excessive competition in different sectors of the economy.

Although specific capacity control mechanisms are still being developed, many plants have already reduced production: in the first half of the year, it reached its lowest level since 2020. This calls into question the need for further administrative restrictions.

Growth in demand is also having a positive impact: according to Bloomberg Intelligence, domestic steel consumption in China grew by 4.3%, driven in particular by the automotive and engineering industries. Although construction remains weak, exports continue to grow despite global trade barriers.

According to UBS forecasts, more than 60% of Chinese steelmakers are already profitable, which is twice as much as in July 2024. The large-scale construction of a hydroelectric power plant in Tibet may also have a positive impact.

However, sharp increases in raw material prices, especially for coking coal, could once again threaten profit stability.

As GMK Center reported earlier, in June, Chinese steel companies reduced steel production by 9.2% y/y and 3.9% m/m to 83.2 million tons. This is the third consecutive monthly decline in smelting volume, as a result of which steel production in the first half of this year fell to its lowest level since 2020 – 514.8 million tons (-3% y/y).