The steel giant is seeking balance amid tightening environmental restrictions and new global trade rules. In early 2026, steel enterprises in Hebei once again faced mandatory staggered production. On January 2, five cities—Handan, Hengshui, Xingtai, Cangzhou, and Baoding—activated orange alerts for heavy pollution weather at 12:00, implementing Level II emergency responses. They joined several provinces, including Hebei, Shandong, and Shanxi, which had already scheduled a full 90-day production halt for the first quarter, collectively reinforcing air pollution control efforts in the Beijing-Tianjin-Hebei region during autumn and winter.
Simultaneously, the EU Carbon Border Adjustment Mechanism (CBAM) officially entered its charging phase on January 1, with steel products included in the first batch subject to the levy. The global steel industry stepped into 2026 under dual pressures from environmental and trade fronts. Industry experts suggest that this year may become a critical window for the green transformation of the steel sector.
Stricter Environmental Production Cuts: Five Cities in Hebei Activate Emergency Responses
At the start of 2026, China’s steel industry welcomed a new round of environmental production restrictions. The five cities of Handan, Hengshui, Xingtai, Cangzhou, and Baoding simultaneously activated orange alerts for heavy pollution weather, mandating production stops and cuts for industrial enterprises. This follows the production restriction measures implemented in early November 2025 in cities like Tangshan, Handan, and Shijiazhuang, indicating that environmental control has become a regular practice in the Beijing-Tianjin-Hebei region.
As China’s largest steel-producing province, Hebei’s capacity adjustments profoundly impact the national market. The staggered production plan shows that Hebei will implement a full 90-day halt in the first quarter, with similar arrangements in provinces including Shandong, Shanxi, Shaanxi, Inner Mongolia, Xinjiang, Liaoning, Heilongjiang, and Jilin.Hunan province will stagger production for no less than 70 days, Guizhou for no less than 65 days, and Henan for 60 days, revealing significant regional variations.
Unlike earlier “one-size-fits-all” approaches, current environmental policies emphasize differentiated implementation. According to the “Beijing-Tianjin-Hebei Autumn and Winter Air Pollution Control Plan” released in 2025, regions must implement differentiated staggered production for high-emission industries like steel, building materials, and coking.The plan specifies that “enterprises failing to meet pollutant discharge permit requirements shall fully adopt staggered production measures,” while “environmental benchmark enterprises may be exempt from production restrictions.”
The Tangshan municipal government categorizes steel enterprises into four classes (A, B, C, D). Class A enterprises are exempt from staggered production, Class B face 30% reduction, Class C 50%, and Class D 70%. This refined, categorized management approach aims to ensure air quality while avoiding simplistic and drastic capacity cuts.
Diverging Global Demand and Increasingly Complex Trade Environment
The World Steel Association’s short-term demand forecast for 2025-2026 indicates that global steel demand in 2025 is expected to remain flat compared to 2024, at approximately 1.75 billion tonnes. A mild rebound of 1.3% is projected for 2026, reaching 1.772 billion tonnes.Behind this growth trend lies significant regional and product diversification.From a product perspective, steel for manufacturing shows strong performance, while steel for construction remains persistently weak. From January to October 2025, China’s total apparent steel consumption was 930 million tonnes, a year-on-year increase of 5%. However, by category, a pattern of “weak long products, strong flat products” emerged: consumption of hot-rolled, cold-rolled, and medium-thick plates increased by 1%, 2%, and 5% respectively, while rebar and wire rod declined by 5% and 8%.
By sector, steel consumption in the real estate industry decreased by 12% year-on-year, while demand from manufacturing sectors like automobiles and shipbuilding remained relatively stable.The formal implementation of the EU CBAM has become a key variable affecting the global steel trade landscape. Initially covering six product categories including steel, the mechanism plans to expand to about 180 steel- and aluminum-intensive downstream products by 2028.A spokesperson for China’s Ministry of Commerce has stated that China will resolutely take all necessary measures in response to any unfair trade restrictions.
The rise of trade protectionism is evident. In 2025, countries including Vietnam and South Korea imposed anti-dumping duties on Chinese steel products, while the EU, Mexico, and others continued anti-dumping investigations. These factors have increased compliance costs for Chinese steel exports. Although China’s steel export volume grew by 6.57% year-on-year in the first ten months, future growth rates may slow down.
Steel Enterprises Strategize Amid Difficulties, with Six Mills Defying Trends to Hold Prices
Confronting market challenges, steel enterprises are adopting diversified strategies. In early January 2026, several companies, including Jiangsu Yonggang, Zhongtian Iron & Steel, Baowu Steel, Shagang Group, Ansteel, and Benxi Steel, issued new price policies, with some choosing to hold prices against market trends.
Baowu Steel raised its January ex-factory prices by 100 yuan/tonne compared to December, with the base price for hot-rolled Q235B (excluding tax) reaching 4,635 yuan/tonne. Ansteel and Benxi Steel also increased prices for hot-rolled, pickled, and cold-rolled products by 100 yuan/tonne. This reflects both confidence in high-end products and a necessary choice under cost pressures.
The profitability situation for steel mills remains severe. Data shows that compared to the January 4 billet price of 2,930 yuan/tonne, steel mills were losing an average of 99 yuan/tonne. The profit rate for national steel enterprises was only 38.1%, showing a slight month-on-month increase of 0.87% but a year-on-year decrease of 9.95%.Independent electric arc furnace steel mills performed slightly better, with 39.67% achieving small profits, 47.11% breaking even, and 13.22% incurring losses.Facing difficulties, steel companies are adjusting their operational strategies. Some adhere to the principle of “three fixes and three don’ts”—producing according to customer orders and not proactively building winter inventories to gamble on the market. Maintaining low inventory levels and purchasing raw materials as needed has become a common strategy.
Product structure transformation has become a key breakthrough. Shagang Group reduced production of low-margin rebar, shifting towards higher-value silicon steel and shipbuilding plate, raising its profit margin from 1.2% in 2024 to 4.5% in 2025. Ansteel’s development of LNG storage tank steel broke foreign monopolies, with cumulative production reaching 1.5115 million tonnes over the past three years.
Industry Restructuring and the Imperative of Green Transformation
Jiang Wei, Vice Chairman and Deputy Secretary of the Party Committee of the China Iron and Steel Association, pointed out that “self-discipline in production control and inventory reduction are certain elements for coping with the current complex market,” emphasizing that “controlling production pace and enterprise inventory is the primary task for the industry to maintain benefits.”
Looking ahead to the “15th Five-Year Plan” period, China’s steel industry faces nine development paths: adhering to technological innovation, advancing digitalization, networking, and intelligence, adjusting product structures, accelerating green and low-carbon transformation, establishing a Chinese green steel certification system, deploying short-process steelmaking, emphasizing scrap steel resource recycling, and actively participating in the international market.The steel industry in 2026 may exhibit an “M”-shaped trend. Against the backdrop of continued “anti-involution” and supply-side policies, still-weak real estate demand, and limited support from manufacturing, the rebar market is expected to remain weak, with prices oscillating within the range of 3,000-3,500 yuan/tonne.The cost side may provide some support. The average import price of iron ore from January to November 2025 was $97.18/tonne. In 2026, with the gradual ramp-up of the Simandou project and some production increase plans from the four major mining companies, the price center is expected to remain between $90-100/tonne. Prices for coke and coking coal have already fallen significantly, with cost-side concessions somewhat alleviating the pressure on mill losses.
Wang Jianhua, Chief Steel Analyst at Shanghai Steelhome, predicts that China’s crude steel output will slightly decline in 2026, potentially achieving a weak balance between supply and demand. He also warns that the impact of policy changes on steel exports cannot be ignored, forecasting a reduction of 19 million tonnes in domestic steel exports.Hebei’s steel production restrictions are just a microcosm of the deep adjustments in the global steel industry. With the implementation of the EU CBAM, green and low-carbon transformation has become a mandatory question rather than an optional one for steel enterprises.Those who proactively deploy short-process steelmaking, improve scrap steel utilization efficiency, and develop high-value-added, low-carbon products may gain a head start in the industry reshuffle.
Future competition in the steel industry will no longer be simply about scale, but a comprehensive contest involving environmental technology, product structure, and cost control capabilities.
Note: Reprinted from Steel.com
