Chinese Steel Production Resilient Yet Structural Decline Remains On Track

Chinese steel production has shown surprising resilience in 2026. After peaking at approximately 1.06 billion tonnes in 2020-2021, crude steel output fell to approximately 1.0 billion tonnes in 2025 and is tracking at a similar level in 2026. While this represents a decline from the peak, it has not been as sharp as many forecasters predicted.

The property sector, which historically accounted for approximately 30-35% of Chinese steel demand, remains in contraction. New housing starts are down approximately 15% year-on-year, and the inventory overhang in the residential sector will take years to absorb. This is the primary structural headwind for Chinese steel demand.

Offsetting the property weakness is growth in infrastructure, manufacturing, and energy-related steel demand. The Chinese government's fiscal stimulus in 2025-2026 has focused on infrastructure, with steel-intensive investments in railways, subways, and renewable energy infrastructure. Solar and wind installations require significant steel, creating a new demand floor.

China's EAF share of steel production is growing slowly from approximately 12% today. The government's policy goal is to increase EAF share to 20% by 2030, which would reduce the amount of iron ore needed per tonne of steel. Each percentage point shift from BF-BOF to EAF reduces iron ore demand by approximately 8 million tonnes annually.

The long-term trajectory for Chinese iron ore imports is bearish. As the steel industry gradually contracts (forecast to reach 900-950 million tonnes by 2030) and the EAF share increases, iron ore import demand could decline by 100-200 million tonnes from current levels. This structural headwind is the primary reason for the bearish medium-term iron ore outlook.