China's rising auto exports offset weak domestic sales, supporting H2 CRC outlook

China's rising automobile exports are cushioning the country's flat steel market from weak domestic car sales, with industry participants expecting steady steel demand from the automotive sector through the second half of 2026 despite a 21% year-over-year decline in domestic vehicle sales over the first six months.

China's vehicle exports rose 75% year over year in June to 1.04 million units, bringing total exports in the first half to 5.1 million units, up 65% from a year earlier, China Association of Automobile Manufacturers data released July 9 showed.

The contrasting trends are supporting consumption of automotive sheet products, particularly cold-rolled coil, even as domestic car-buying appetite remains subdued.

Manufacturing exports remained the key pillar for China's flat steel demand, with limited prospects for recovery in the domestic property sector and consumer spending, several mill sources, traders and analysts said.

"Due to weak expectations for further household income and car-buying demand being brought forward by government incentives in 2025, domestic automobile sales in the second half of 2026 will likely remain below year-ago levels," a mill source said. "Fortunately, vehicle exports should continue to record strong growth and largely offset the decline in domestic sales, meaning overall steel demand from the auto sector should remain mostly stable this year."

Manufacturing support

The mill source said automotive steel consumption is unlikely to post year-over-year growth in 2026, but it is unlikely to become a drag on overall steel demand.

A second mill source said demand for automotive sheet products in 2026 is expected to be broadly in line with 2025 levels.

China's automobile production totaled 2.76 million units in June, up 5.5% from May but down 1.2% year over year, according to CAAM data. Domestic automobile sales in June declined 23% from a year earlier to 1.77 million units, while total domestic sales over January-June fell 21% year over year to 9.92 million units.

A third mill source said flat steel prices, including CRC, were likely to continue fluctuating within a narrow range at relatively low levels, citing stable end-user demand from manufacturing industries and limited changes in steel mill output.

The third mill source said pig iron and crude steel production in July was expected to decline slightly from June levels, noting the reductions would likely be very modest.

Platts, part of S&P Global Energy, assessed Chinese domestic CRC at Yuan 3,690/metric ton ($543/mt) on July 7, down Yuan 100/mt from late May and Yuan 10/mt from late June.