China’s pig iron and crude steel production declined in late May as the construction and manufacturing sectors entered their off-season; however, steel prices remained under pressure due to weak domestic demand.
The country’s daily pig iron and crude steel production at member steel mills averaged 1.913 million mt and 2.091 million mt over May 21-31, down 3.5% and 4.9% from mid-May, and 9.9% and 12.7% lower year over year, according to the latest data from the China Iron and Steel Association.
In April, the pig iron and crude steel output from CISA member mills represented 81% and 71% of China’s total pig iron and crude steel production, respectively, providing a healthy indication of the overall output trend.
Some market participants expect China’s daily pig iron and crude steel production in May to remain higher than in April and the year-ago level.
“The downtrend in production has continued into June amid shrinking demand in the off-season,” said a trading source. “The pig iron and crude steel output may even fall to slightly below year-ago levels in June, but it is still unlikely for the steel prices to gain much upward momentum due to poor domestic steel demand.”
The Platts-assessed Chinese domestic hot-rolled coil and rebar prices fell to Yuan 3,/mt ($/mt) and Yuan 3,/mt on June 9, down 2.1% and 2.3% from May 20, and down 15.7% and 16.8% from a year earlier. Platts is part of S&P Global Commodity Insights.
According to China-based market sources, as of early June, the decline in pig iron and crude steel production remained slow amid weak margins faced by most Chinese steel mills.
Some market sources expect China’s steel exports to remain strong in May and June, possibly supporting the domestic steel market in the off-season.
Falling demand
Construction steel demand has been falling, partly due to seasonal factors, and the slowdown caused by a sluggish property sector.
The monthly operating rate of major engineering machinery in China averaged 59.5% in May, down by 2.45 percentage points from April and by 5.01 percentage points from a year ago, data from the China Construction Machinery Association showed on June 6.
“Manufacturing steel demand has gradually slowed recently due to the low season factor, but what the market is most concerned about is that the manufacturing sector may weaken in the second half of 2025,” said a mill source.
“This is because the surge in exports triggered by the temporary reduction of the US tariffs on China may soon come to an end, leading to a potential weakening of manufactured goods exports starting from the end of June.”
Meanwhile, government subsidies for domestic consumer goods trade-ins have accelerated demand to the first half of 2025, according to the mill source. Unless more robust stimulus packages for consumption are introduced soon, steel demand from certain consumer goods manufacturing sectors, such as automobiles and home appliances, might encounter downward pressure in the second half of the year.
Trading sources said overseas order bookings of Chinese steel for shipments in May and June have remained robust. Some expect May exports to remain above 10 million mt, up from 9.514 million mt a year earlier.
Strong steel exports could partly offset the downward pressure in China’s home market, but the domestic market may not gain much upward momentum, as the decline in domestic steel demand appears to outweigh the drop in steel production, according to trade sources.
As of May 31, finished steel inventories at steel mills and major spot markets monitored by the CISA totaled 23.24 million mt, down 3.7% from the end of April and about 7.7% lower year over year.
Trading sources deemed the decline in steel inventories a result of market destocking amid sluggish demand and a pessimistic outlook.
Source: Platts
