China's steel industry continues to face demand pressure in Apr'26 amid slowing economic growth

• Crude steel production dips 3% y-o-y in Apr'26, steel exports decline 9%
  
  
• Infrastructure investment growth drops to 4.3% after strong Q1 momentum
  
  
• Manufacturing also weakens amid high input costs, geopolitical uncertainty
  
  

Morning Brief: China's steel industry continued to contract during April 2026, with slowing domestic demand and prolonged weakness in downstream investment limiting the expansion of the steel sector. Both crude steel production and steel exports continued to decline, a stark difference from the latter half of CY'25, when exports remained higher even as output fell.

Overall, the broader economy showed signs of downward momentum in April despite a solid start in the first quarter. China's gross domestic product (GDP) had expanded 5% y-o-y in Q1CY'26, matching the upper end of Beijing's annual growth target.

However, the April slowdown reinforced expectations that policymakers may need to introduce additional fiscal and monetary support later this year if domestic demand remains weak.

Of note, the growth in retail sales, an indicator of consumption growth, slowed sharply to 0.2% y-o-y from 1.7% in March and 5.1% in April 2025, marking the weakest expansion since December 2022. Conversely, industrial output grew 4.1% y-o-y in April, reinforcing the supply-demand imbalance currently ailing the nation.

Moreover, private sector investment also contracted 5.2% y-o-y during January-April, highlighting continued caution among businesses despite policy support measures.

However, China's exports remained strong in April as overseas buyers accelerated purchases and stockpiled goods amid concerns that the US-Iran conflict could drive up global input and freight costs. Exports rose 14.1% y-o-y in April, accelerating sharply from March's 2.5%.

Highlights of China's steel industry in Apr'26

Crude steel output dips but at slower pace: China's crude steel output declined by 2.8% y-o-y to 83.6 mnt in April, indicating continuing production discipline given subdued domestic and external demand and narrow profit margins due to high raw material costs.

However, the 2.8% dip remains the smallest decrease in any month in CY'26 so far. This also helped narrow the y-o-y drop in crude steel output to 4.1% in January-April compared to 4.6% in the first quarter.

The comparatively smaller drop in April could be attributed to improved demand during April, generally considered a strong season for the steel industry before the monsoon sets in late-May to June.

Pig iron production declined by 3.6% to 70.7 mnt, at a faster pace than crude steel output, indicating slower operations at blast furnace (BF)-based mills compared to electric arc furnace (EAF)-based producers.

Steel exports continue to slide: Steel exports fell by 9.2% y-o-y to 9.5 mnt in April, as stricter export licensing mandates continued to curb supply of non-taxed material. Protectionist trade measures, shipping disruptions due to the US-Iran conflict, and tighter supply also contributed to the y-o-y fall.

However, shipments were up 4% m-o-m as logistics conditions improved following disruptions in March and Chinese exporters attempted to fill supply gaps created by lower Iranian exports.

Growth in iron ore imports slows: Iron ore imports inched up by a mere 0.7% in April, a sharp slowdown from the strong growth in previous months. Notably, the y-o-y increase in iron ore imports slowed to 8% during January-April compared to over 10% in the first quarter.

The moderation is a result of a slowdown in shipments from Brazil during March due to wet weather, while shipping delays and high seaborne freights also weighed on demand.

Coal production dips, imports fall sharply: Coal production dipped 1% y-o-y to 386 mnt in April, even as imports fell 14% y-o-y to 33.1 mnt, the lowest since June 2025. High coal prices overseas, triggered by a demand spike following global natural gas shortages during March, discouraged imports, while availability remained tight due to regulatory uncertainty in Indonesia.

This fall was also despite a 3.3% growth in thermal power output, which was up for a fourth straight month in April as lower output from wind, solar, and nuclear sources increased reliance on thermal power.

Manufacturing investment slows despite shift towards high-tech sectors: Cumulative manufacturing investment growth slipped to 1.2% over January-April from 4.1% in the first quarter. Investment growth continued shifting away from traditional industries towards advanced manufacturing and technology-driven sectors, but even then, funding slowed.

Manufacturers remained cautious because of rising raw material costs, weak consumer confidence, and geopolitical uncertainty affecting global trade flows. While strong growth was recorded in high-tech manufacturing, aerospace, and semiconductors, solar cells and other power generation equipment remained weak.

China's official manufacturing purchasing managers' index (PMI) stood at 50.3 points in April, marginally lower than March's 50.4. Although still above the 50-point expansion threshold, the reading reflected slowing industrial momentum. The escalating Middle East conflict also points to vulnerabilities in China's export-led manufacturing model. Higher energy costs may eventually weaken fresh export orders once stockpiling demand fades.

Automobile sector weakens, but NEVs remain bright spot: China's automobile sector weakened further in April as domestic demand softened after earlier stimulus-driven purchases.

Total automobile production declined 1.7% y-o-y to 2.575 million units, while total sales dropped 2.5% y-o-y to 2.526 million units. The slowdown partly reflected fading benefits from vehicle trade-in policies introduced earlier, as a large portion of demand had already been front-loaded into previous months.

However, new energy vehicles (NEVs) continued outperforming the broader market. NEV production increased 5.5% y-o-y to 1.32 million units, while sales rose 9.7% y-o-y to 1.344 million units. Moreover, with domestic demand declining, manufacturers turned to overseas markets to boost sales. NEV exports more than doubled y-o-y to 430,000 units, while traditional fuel vehicle exports rose 49% y-o-y to 472,000 units.

Property sector downturn worsens further: China's property sector remained the largest drag on steel demand during April. Real estate investment declined 13.7% y-o-y during January-April, worsening from the 11.2% contraction recorded in Q1CY'26. According to reports, property investment has now nearly halved compared with its 2021 peak.

Meanwhile, cement production, down 10.8% y-o-y, also remained at its lowest level for April since 2020, highlighting continued weakness in construction activity. Additionally, home prices across 70 cities fell 3.5% y-o-y in April, marking the steepest decline in nearly a year. The prolonged property downturn has continued weighing heavily on consumer confidence, given that around 70% of Chinese urban household wealth is tied to real estate.

Infrastructure investment also slows: Infrastructure investment growth declined to 4.3% y-o-y during January-April after peaking at 11.4% during the first two months of the year and reaching 8.9% in the first quarter. The deceleration indicates that even public infrastructure spending will not be sufficient to offset weaknesses in manufacturing and real estate activity.

Outlook

BigMint expects China's steel market to remain under pressure through the remainder of H1CY'26 as weak property activity, sluggish domestic demand, and softer external conditions continue affecting steel consumption.

Although the decline in crude steel output moderated in April, the improvement appears largely seasonal rather than demand driven. Mills are likely to maintain cautious production strategies amid persistently thin margins, elevated raw material costs, and continued oversupply.

Moreover, although exports may remain relatively high at around 9 mnt, rising trade barriers and geopolitical disruptions are likely to constrain y-o-y growth.