en.Wedoany.com Reported - China's steel industry faced dual challenges of price and profitability amid market fluctuations in the first quarter of 2025. Although a brief recovery occurred in April, the sector has come under renewed pressure since late May. According to the China Iron and Steel Association (CISA), the average China Steel Price Index (CSPI) in Q1 stood at 91.39 points, down 4.39% from the same period in 2025 and 16.9% from the same period in 2024. The pace of steel inventory destocking was the slowest for the corresponding period in recent years, with key surveyed steel enterprises reporting main business profits of only 1.03 billion yuan, a year-on-year decline of nearly 90%. The ferrous metal smelting and rolling processing sector became the only loss-making industry among China's 41 major industrial categories in Q1.
Against this backdrop, CISA issued initiatives for self-disciplined production control and inventory reduction through mechanisms such as the five-party working consultation meeting and the Q1 economic operation symposium. Most enterprises responded actively. After mid-to-late April, social steel inventories continued to decline, and mill inventories reached relatively low levels for the corresponding period in recent years by the end of April. In April, the average CSPI rose 1.04% month-on-month. CISA member enterprises posted profits of 10.975 billion yuan, the highest for the same period in four years, with main business profits of 4.73 billion yuan, up 119.7% month-on-month. The profit margin stood at 1.28%, with per-ton steel profit reaching 30 yuan/ton, an increase of 31 yuan/ton month-on-month, of which rising steel prices contributed 30 yuan/ton. Industry self-discipline in production control played a significant role in alleviating supply-demand imbalances and supporting price recovery.
However, entering May, steel prices declined continuously after reaching this year's CSPI high of 96.12 points in mid-May, falling to 94.39 points by the end of May, a drop of 1.79% within two weeks. HRB400 rebar spot prices fell from 3,310 yuan/ton to 3,240 yuan/ton, while the main futures contract dropped from 3,286 yuan/ton to 3,158 yuan/ton, a decline of 3.89%. The price correction was partly due to overly optimistic earlier expectations and weakening cost support, and partly linked to production expansion impulses after some enterprises turned profitable. According to CISA statistics, the average daily crude steel output of key enterprises in early May increased by 3.6% month-on-month. By mid-May, inventories at key enterprises reached 18.77 million tons, up 1.89 million tons month-on-month and 2.42 million tons year-on-year, hitting the highest level for the same period in four years. Social inventories increased by 1.21 million tons year-on-year, a rise of 14.5%.
The supply-demand situation may continue to face pressure in the coming period. Data from the National Bureau of Statistics shows that from January to April, the national fixed asset investment growth rate turned negative to -1.6%, down 3.3 percentage points from Q1. Infrastructure investment and manufacturing investment growth rates fell by 4.6 and 2.9 percentage points respectively from Q1. Real estate development investment declined by 13.7% year-on-year, with new construction starts still down 22.0%. Automobile production fell by 5.5% to 9.61 million units. In the first four months of this year, cumulative crude steel output decreased by 4.1% year-on-year. On the export front, the EU's Carbon Border Adjustment Mechanism (CBAM) has been implemented, with default carbon emission values for Chinese steel higher than actual levels, increasing export costs. A new round of EU steel safeguard measures, effective from July, will reduce annual duty-free import quotas to 18.3 million tons, a 47% decrease from 2024, while tariffs on excess volumes will rise sharply from 25% to 50%, making the export outlook increasingly challenging.
Pressure on raw materials and fuels is particularly pronounced. Since mid-to-late April, iron ore prices have risen more than steel prices. Freight rates on the Australia route increased from $9.98/ton to $16.23/ton, while the Brazil route rose from $23.4/ton to $37.39/ton. Recently, iron ore prices have corrected somewhat from $110/ton in early to mid-May but remain elevated at around $105/ton. Coking coal prices have stayed high, with spot prices for low-sulfur primary coking coal exceeding 1,500 yuan/ton in April. Following a coal mine accident in Qinyuan County, Shanxi Province, on May 22, the main coking coal futures contract rose from 1,162.5 yuan/ton to 1,285.5 yuan/ton within a week, a gain of 10.6%, prompting intensified coal mine safety inspections in multiple regions. As of June 1, the main coking coal futures contract surged 7.12% in a single day, accumulating an 18.5% increase since the accident. Inspections are expected to tighten further during the National Safety Production Month in June. Currently, per-ton steel profits are hovering near the breakeven point, with some enterprises beginning to incur gross losses. The industry must continue to adhere to the "three determinations and three avoidances" operational principle and self-disciplined production control and inventory reduction to prevent the supply-demand imbalance from widening and maintain rational operations aligned with actual output levels.
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