Supply and demand imbalances become more prominent, prompting the industry to accelerate quality improvement and transformation.

The domestic steel industry is undergoing a period of profound adjustment. Under multiple pressures, including a prominent contradiction between supply and demand, high raw material costs, and escalating international policy barriers, the industry as a whole is operating steadily, but profitability is under pressure. Enterprises are accelerating production control and inventory reduction, promoting structural upgrades and low-carbon transformation, and striving to move towards a new stage of high-quality development, according to the China Iron and Steel Association.

In the first quarter, steel production actively adjusted its pace, resulting in a year-on-year decline in crude steel output. Data shows that in the first quarter of 2026, national crude steel output was 248 million tons, a year-on-year decrease of 4.6%. Integrated steel mills controlled supply through maintenance shutdowns, production cuts, and optimized production plans, while electric arc furnace steel mills maintained low operating rates due to compressed profits. However, due to the fixed costs of blast furnaces, overall supply remained relatively abundant, resulting in a market pattern of "weak supply and demand, but relatively loose supply."

Demand continued its divergent trend, with overall support insufficient. Demand for construction steel was weak in the first quarter due to work stoppages during the Spring Festival, low temperatures, and a continued sluggish real estate market, resulting in sluggish end-user procurement and meager transactions for long steel products such as rebar. While continued infrastructure investment and steady progress in transportation, water conservancy, and urban renewal projects provided some support for construction steel, it was insufficient to reverse the overall weakness. Demand for industrial steel was more resilient, with stable production in manufacturing sectors such as machinery, automobiles, and home appliances. Strong demand for high-end plates and profiles in new energy equipment and heavy machinery sectors drove a temporary recovery in prices for industrial materials such as hot-rolled coils, becoming an important support for the market.

Price trends exhibited a weak and volatile pattern with differentiation among different product types. Steel prices fluctuated at low levels throughout the first quarter. A brief rebound occurred in early January due to steel mills supporting prices and expectations of export policies being implemented; however, post-holiday demand recovery fell short of expectations, coupled with continued inventory accumulation, putting downward pressure on prices. (China Iron and Steel Association) Among them, long steel product prices fell significantly, with rebar prices once dropping to around 3150 yuan/ton; plate steel prices were relatively resilient, while hot-rolled coil prices began a strong upward trend in mid-to-late April, driven by strong export demand and profit margins, with prices steadily rising. As of the end of March, the average China Steel Price Index (CSPI) had slightly declined compared to the fourth quarter of 2025, indicating that low-price competition persisted in the market.

Regarding inventory, social and mill inventories continued to accumulate in the first quarter, gradually highlighting the pressure. Around the Spring Festival, market shutdowns and cautious stockpiling by traders, coupled with a much larger contraction in demand than in supply, passively increased inventory. As of the end of March, inventories in key steel markets nationwide increased by over 15% month-on-month, with rebar and hot-rolled coil inventories both higher than the same period last year, extending the inventory reduction cycle and exacerbating the pressure for future market adjustments.

High costs are putting pressure on corporate profit margins. Iron ore port inventories remained high at over 150 million tons in the first quarter, with prices holding firm. Coking coal and coke prices remained high due to environmental protection-related production restrictions and tight supply, keeping steel mill production costs persistently high. Weak downstream demand hindered the transmission of costs to finished steel products, significantly pressuring steel companies' profitability. Data shows that the total profit of key steel enterprises in the first quarter was 21.7 billion yuan, a year-on-year decrease of 5.1%, with profits in the core steel business plummeting by 85.6% year-on-year. Over 60% of enterprises suffered losses, highlighting the industry's operational pressure.

Regarding policy and the international environment, multiple factors are guiding the industry's transformation. Domestically, policies to control crude steel production and phase out inefficient capacity continue to advance, guiding the industry to control total output and optimize its structure. Internationally, the EU's Carbon Border Adjustment Mechanism (CBAM) officially came into full effect on January 1st, creating carbon tariff barriers for my country's steel exports and forcing enterprises to accelerate low-carbon transformation and establish carbon footprint management systems. Simultaneously, the steel export license management policy has been implemented, continuously optimizing the industry's export structure and increasing the proportion of high value-added products exported, according to the China Iron and Steel Association.

The steel industry is accelerating its transformation, with quality and efficiency improvement becoming the core direction. Faced with difficulties, steel companies are actively implementing the "three fixed and three no's" operating principles, adhering to self-discipline in controlling production and reducing inventory, while accelerating product structure upgrades, increasing R&D and production of high-end and special steels, and seizing emerging markets such as new energy and high-end equipment manufacturing, according to the China Iron and Steel Association. Green and low-carbon transformation is accelerating, with technologies such as hydrogen metallurgy and ultra-low emission retrofitting being promoted more rapidly, helping the industry achieve its "dual carbon" goals. Furthermore, industry concentration continues to increase, with leading companies leveraging their technological and scale advantages to continuously enhance their competitiveness.

Looking ahead to the second quarter, the steel industry will still face supply and demand dynamics, cost pressures, and transformation challenges. With warmer weather, infrastructure and real estate projects are resuming work and production at a faster pace, and demand is expected to gradually recover; however, supply-side control measures remain strong, and the market supply and demand pattern may improve. The future trend of the steel market will mainly depend on the recovery progress of end-user demand, the speed of inventory reduction, and fluctuations in raw material prices. In the short term, steel prices may fluctuate and rebound; in the long term, the industry needs to continue to deepen structural reforms, strengthen innovation-driven development, and accelerate green transformation in order to overcome the current predicament and achieve sustainable and high-quality development.