China’s steel industry is going through a painful but important transition. Although government policies to control excessive competition and support growth have helped demand recover slightly during the peak season, high raw material costs continue to pressure the industry. With costs taking up about 96% of revenue, the sector reported losses of more than CNY 3.3 billion in the first quarter, and most steel products still generate negative margins.

Market demand is also changing. Traditional demand from real estate keeps shrinking, while infrastructure projects supported by long-term government bonds and resilient high-end manufacturing are becoming the main drivers. This shift has caused clear differences in company performance. 

Leading firms in special steel and high-end products, such as Citic Pacific Special Steel Group and Nanjing Iron and Steel, benefit from high-value sectors like new energy and shipping and can remain profitable. In contrast, traditional producers focused on basic carbon steel face heavy losses.

Overall, China’s steel industry has moved away from profit growth through scale expansion to a new stage where technology and product quality decide success. Future competitiveness will depend on high-value products and strong research capabilities, especially as high costs continue to squeeze profits.