Quick Guide to the Steel Industry
1. Scale: A Trillion-Yuan Sector in an Era of Decline
In 2025, global crude steel output reached 1.849 billion tonnes, down 2.0% year on year. China produced 961 million tonnes, down 4.4% - accounting for roughly 52% of the global total and ranking first worldwide for 30 consecutive years. Global capacity stands at about 2.55 billion tonnes with utilization of only around 73%. Regulators have officially identified "excess aggregate supply and insufficient effective demand" as the industry's core contradiction.
2. Two Process Routes (The Industry's Most Fundamental Divide)
|
Long route (BF–BOF) |
Short route (EAF) |
|
|---|---|---|
|
Raw materials |
Iron ore + coke |
Scrap + electricity |
|
China's share |
~90% |
~10% |
|
Carbon emissions |
Baseline (accounts for 95% of sector emissions) |
~30% of the long route |
|
Global average |
BOF 69.4% |
EAF 30.3% (US 71.3%, EU 45.8%) |
China's EAF share has long lagged the global average, mainly due to insufficient scrap supply and no electricity cost advantage - EAF steel costs RMB 400–600/tonne more than the BOF route.
3. Industry Chain and Cost Structure
Upstream: Iron ore (import dependence above 80%; Australia and Brazil supply about 75%; dominated by the Big Four miners), coke/coking coal (about 0.6 tonnes of coking coal per tonne of steel), and scrap. Iron ore plus coke together make up more than 70% of costs.
Midstream: Ironmaking → steelmaking → continuous casting → rolling. Capital-intensive with heavy depreciation; mills struggle to halt production even at a loss given prohibitively high restart costs - the root reason steel prices can "fall without a floor."
Downstream: Construction vs. manufacturing. The key shift - manufacturing's share of steel demand has risen to about 51%, surpassing construction for the first time, though real estate remains the biggest drag.
4. Three Keys to Reading Steel Prices
Watch the spread: The "per-tonne margin" - steel price minus raw material cost - determines whether mills ramp up or schedule maintenance.
Watch inventory: Declining social and mill inventories signal a bottom, but "failing to destock during peak season" is a warning sign.
Watch daily hot metal output: The 2.36–2.38 million tonne range is a high-frequency gauge of supply tightness.
5. Three Main Themes Today
Supply-demand rebalancing (both output and consumption falling, with self-disciplined output cuts underpinning the floor), rising concentration (China's CR10 is about 42%, well below the 60–80% seen in Japan and South Korea), and structural upgrading (specialty steel, silicon steel, shipbuilding plate, and automotive sheet command premiums, while commodity steel suffers from homogenized cutthroat competition). On carbon: steel has been included in the national carbon market, and combined with the EU's CBAM, long-route producers face real, hard carbon costs.