China's steel industry is accelerating its shift from volume-driven expansion toward higher-quality, more efficient growth, as changing demand and rising costs drive steelmakers to optimize capacity and product mixes and develop higher-value-added products to support sustainable development, industry insiders said.
The transition comes as the steel industry faces considerable market pressure. Data from the China Iron and Steel Association (CISA) showed that China's crude steel output fell 2.9 percent year-on-year to 725 million metric tons in the first three quarters of 2026.
Meanwhile, apparent consumption of crude steel declined 3.8 percent to 625 million tons. Major steel enterprises tracked by the association posted combined profits of 71.8 billion yuan ($10.8 billion), down 27.4 percent year-on-year, according to the CISA.
Amid pressure to stabilize growth in the steel sector, five government departments — including the Ministry of Industry and Information Technology — jointly issued a work plan for promoting stable growth in the iron and steel sector (2025-26) in 2025.
The plan calls for stronger capacity and output controls, a better balance between market supply and demand, and increased supply of high-end products. It also seeks to promote industrial upgrading through equipment renewal, digital transformation and green and low-carbon upgrades.
To address the persistent imbalance between strong supply and weak demand, the CISA has urged steelmakers to align production with sales and profitability, while reducing inefficient supply and shifting their focus from output volume to market demand and actual returns.
Meanwhile, changes in steel demand are providing direction for the industry's structural adjustment. Manufacturing accounted for 52 percent of steel consumption in the first half of 2026, up from 51 percent in 2025, the association's figures showed.
In the first three quarters, rebar output fell by 17.18 million tons year-on-year, while medium plate production increased by 4.91 million tons, reflecting ongoing adjustments in the steel product mix in response to changes in downstream demand, according to the CISA.
On the product side, developing high-performance and specialized steel products has become an important way for steelmakers to increase added value. Certain specialty steels must meet stringent requirements for material performance, manufacturing precision and quality consistency, creating market opportunities for producers with technological advantages, according to the CISA.
However, moving upmarket does not mean every steelmaker should shift toward the same product categories, Luo Tiejun, vice-president of the CISA, said at an industry meeting.
The steel sector has entered a phase of declining volumes and optimization of existing capacity, and companies should adjust their product structures prudently based on actual demand, Luo said.
Beyond product upgrading, the CISA noted that improving production efficiency and controlling costs are also key priorities for the industry's next stage of development, with artificial intelligence and digital technologies being applied to production management, quality control and energy management to improve efficiency and product consistency.
Wang Guoqing, director of the Beijing Lange Steel Information Research Center, said that amid sluggish demand growth and cost pressures, steelmakers cannot rely simply on increasing output and cutting prices to improve their performance.
Instead, "steelmakers should seek breakthroughs through product upgrading, energy conservation and carbon reduction, digitalization-driven efficiency gains, and expansion along the industrial chain," Wang said.
Looking ahead, Wang said steelmakers could also expand into processing, distribution and customized services, strengthen cooperation with downstream enterprises and gradually transform from standalone material suppliers into comprehensive service providers.
(Source: China Daily)