Goldman Sachs predicts a long period of depressed margins for Chinese steel producers because of high export volumes and a slower reduction in production capacity. Although the industry aims for long-term output cuts, current anti-involution measures intended to stop cut-throat competition are stalling.

These setbacks involve difficulties in meeting ultra-low emission standards and reclassifying compliant companies. Consequently, steel prices will only see modest improvements because supply remains high.

The bank noted that elevated supply levels keep financial pressure on domestic operators. Therefore, steel mills must prepare for continued weak earnings as the industry struggles to balance production with actual global demand and environmental regulations.