China’s domestic steel demand falls further, exports hit another high in May

The Chinese domestic steel demand fell further in May and is likely to continue downward in June, market participants said June 25, as the domestic steel market is expected to remain under pressure in coming months, with steel mills showing reluctance to reduce production.

In tandem with weak domestic demand and higher production, China's steel exports hit the second-highest level in history in May, according to customs data. Market sources said China's exports are likely to remain strong in the rest of 2025.

Falling domestic demand

Chinese domestic steel apparent consumption in May fell to 75.57 million mt, down 12.31% year over year, according to calculations by Platts, part of S&P Global Energy. The calculations are based on data from the National Bureau of Statistics, China Customs and China Iron and Steel Association.

China's daily consumption averaged 2.438 million mt in May, down 4.3% from April.

Over January-May, steel apparent consumption decreased 3.9% year over year to 374.81 million mt, 16.6% lower than in the same period of 2021 when China's property sector peaked.

The apparent consumption equals crude steel output minus net exports and plus the decline in steel inventories, and thus reflects the amount of steel actually consumed domestically.

Some market sources said China's domestic steel demand, particularly in the construction sector, has decreased further in June due to the off-season factor.

They were more concerned that seasonal demand recovery in August-September could be weaker than usual.

This is partly because the export rush of Chinese-manufactured goods in the first half of 2025, in a bid to avoid further escalation of the US tariff hikes, has brought part of the overseas demand forward from H2 2025.

Moreover, some market sources believed the US tariff hikes on China and the rest of the world would begin denting exports of some steel-intensive manufactured goods later in 2025.

However, despite a weak steel demand outlook, China's pig iron and steel production resumed an uptrend in June, trading sources said. The output jump came on the back of strong exports in May and June, coupled with falling raw material prices, which supported steel mills' profit margins, they added.

The Chinese domestic rebar and hot-rolled coil sales profit margins both averaged at around Yuan 100/mt ($14/mt) in June so far, up from about Yuan 20-60/mt in late May, according to the sources.

According to the China Iron and Steel Association, the daily pig iron and crude steel production at its member steel mills over June 1-10 increased 2.6% and 3.2% from the end of May, respectively.

"The rising pig iron and steel production, if continuing into July, will keep the domestic steel market under pressure in the off-season, and could also undermine market momentum when seasonal demand comes back in August and September," said a trading source.

Exports remain robust

Amid a slower domestic steel market and rising steel production, China's exports of semi-finished and finished steel are likely to remain at historically high levels in June, after hitting the second-highest ever in May, said some export trading sources.

Exports of semi-finished and finished steel totaled 11.95 million mt in May, up 6.3% from April and 20.2% from a year ago, the latest Chinese customs data showed.

Over January-May, exports of semi-finished and finished steel rose 16.5%, or 7.516 million mt, year over year to 53.191 million mt.

During the first five months of 2025, imports of semi-finished and finished steel fell 29.7% year over year to 2.956 million mt. Consequently, China's net exports of semi-finished and finished steel reached 50.266 million mt, up 21.1% from a year earlier.

Due to a surge in overseas trade cases against Chinese steel since early 2024, the exports of the targeted products, especially hot-rolled coil, have dropped notably so far in 2025. China's HRC exports over January-May declined 17.1% year over year to 12.12 million mt, data from S&P Global Trade Analytics Suite showed.

However, exports of long steel, particularly billet, experienced a rapid growth over the first five months of 2025, due to low trade barriers and competitive prices amid sluggish domestic construction steel demand.

Chinese billet has so far avoided antidumping duties or trade investigations from overseas.

Over January-May, billet exports jumped 471%, or 3.439 million mt, year over year to 4.17 million mt.

Indonesia, the Philippines and Saudi Arabia were the top three importers of Chinese billet in the first five months of 2025, amounting to 2.072 million mt, up 519% year over year and accounting for 43.9% of the total billet exports.

According to some trading sources, China's overall steel exports are likely to stay high in 2025, while any decline in 2026 may also be slow, due to weak domestic steel demand and competitive steel prices on the global market.

The rise of billet exports could also weigh on the demand for iron ore in these key destinations, some trading sources added.

The Platts-assessed Chinese HRC export prices fell to $442/mt FOB China on June 24, down 6.2% from the end of 2024, and 13.3% lower year over year.

On the same day, the Platts-assessed billet export prices dropped 3.6% from early February to $423/mt FOB China.