China plans steel output cuts but production may rise as trade tensions ease

China's plans to reduce its annual crude steel output for 2025 are progressing, with some mills receiving or being informed about the output cut targets.

However, market participants noted May 14 that it remains uncertain whether steel mills will be able to strictly implement these mandatory output cuts, at least in the first half of 2025, due to a tariff rollback by the US during a 90-day pause.

Output cuts

A state-owned steel mill in Anhui province, eastern China, has been verbally instructed by the provincial government to cut its annual crude steel production by 1 million mt, about 5%, from its 2024 levels in 2025, according to a source close to the matter.

Meanwhile, a mill source in Jiangsu province, eastern China, indicated that the local administration plans to reduce its total crude steel production by about 5% in 2025. However, specific output reduction details have not yet been conveyed to the local mills.

Jiangsu is the second-largest steelmaking hub in China after Hebei province. It produced 119.18 million mt of crude steel in 2024. That means the province is set to reduce its annual crude steel output by nearly 6 million mt in 2025.

As of May 14, sources from mills based in Hebei, Hunan and Guangxi provinces said they had not yet received or been informed of any steel output reduction orders from their respective local governments.

Some sources anticipate that government-mandated steel output reduction targets for 2025 will be announced eventually, with a nationwide output cut of 5% being the most probable target.

China produced 1.005 billion mt of crude steel in 2024, which means the country may aim to reduce its annual crude steel production by around 50 million mt in 2025.

Strong production

A market participant said that the government-mandated steel output cuts are annual targets, but there is no specification on when to implement them, leading to uncertainty in the implementation of the output reductions.

"State-owned steel mills may strictly adhere to the government-mandated steel output cut targets, but whether private steel mills will cut production may depend more on steel demand or their profit levels," the participant said.

According to estimates from the China Iron and Steel Association, the country's daily pig iron and crude steel output in April both increased by 3% compared with March. The daily output figures increased further over May 1-10, by 1.6% and 0.2% from late April, respectively.

China's pig iron and crude steel output over January-March increased to 216.28 million mt and 259.33 million mt, rising about 1.72 million mt and 1.55 million mt year over year, respectively, according to the National Bureau of Statistics.

Some market sources expect the year-over-year growth in pig iron and crude steel output to accelerate from January to May, driven by robust steel exports and a surge in outflows of steel-intensive manufactured goods that have thus far bolstered steel demand.

"Now that the US agrees to reduce tariffs on most Chinese goods from 145% to 30% during a 90-day pause from May 14, the export rush of steel-intensive manufactured goods may continue during the three-month period, which is beneficial to steel demand," said a trading source. "Thus, we may not see any substantial reduction in steel production in the short term."

Some market sources suggest that if the year-over-year growth in crude steel output during the first half of 2025 is excessively strong, achieving the 50 million mt output reduction target for 2025 may become challenging.

"How much China's crude steel output will be reduced in 2025 still depends on the demand side," said another China-based mill source.

"If global trade tensions do not intensify in the second half of the year, and the fall in steel demand is smaller than expected, the government may not force a reduction of 50 million mt crude steel, because the last thing the government wants to see is any mandatory steel output cuts leading to soaring steel prices and hurting downstream users," the mill source said.

The Platts-assessed Chinese domestic hot-rolled coil price rose to Yuan 3,320/mt ($461/mt) on May 14, gaining Yuan 70/mt since May 9, when the US and China agreed to cut reciprocal tariffs. Platts is part of S&P Global Commodity Insights.