The steel industry is a vital foundational sector in China. In recent years, declining demand for steel and environmental and resource constraints have posed significant challenges to the industry. How should we assess the market conditions of the steel industry? What new opportunities arise from these market changes? And how are steel companies responding?

Hebei Iron and Steel Group's Tangsteel Company is producing high-strength automotive steel sheets. Photo by Zhao Hui

Innovation Empowerment: Strengthen the research and development of new materials, processes, and technologies to enhance market competitiveness.

Using an all-scrap electric arc furnace for smelting, the entire process reduces carbon emissions by %, and a steel plate the size of a one-yuan coin can bear the weight of two elephants... At the "lights-out factory" of Baosteel's cold-rolling plant, staff told the author that their ultra-low carbon emission steel, produced via the all-scrap electric arc furnace smelting route, is greener and stronger, enhancing both its "green content" and "gold content." Products like grain-oriented silicon steel made their global debut, while breakthroughs were achieved in key core technologies such as cold plates for launch vehicles and ultra-high-temperature deep-sea special threaded oil pipes... With continuous increases in R&D investment, Baosteel has reaped a wealth of innovative achievements.

"We are closely focused on high-end manufacturing, strengthening originality and leadership, developing premium products including ultra-high-strength steel and grain-oriented silicon steel, and continuously researching and reserving even more advanced new material technologies to enhance the company's profitability," said Wang Juan, Vice President of Baoshan Iron & Steel Co., Ltd.

Strong toughness, excellent formability, and capable of reducing vehicle weight by over %... At HBIS Group Tangsteel Company, the customized production of .mm ultra-thin high-strength quenching and partitioning (Q&P) steel products for automotive manufacturers is rolling off the production line in succession. "Q&P steel is an advanced high-strength steel among the third-generation automotive steels, meeting the current industry's demands for lightweight and green development. This technological breakthrough has expanded Tangsteel's order capabilities in the high-strength Q&P steel sector," said Kuang Shuang, deputy director of the Technology Center at HBIS Group Tangsteel Company. Facing fierce market competition, the company is targeting market needs, continuously advancing breakthroughs in core technologies, and steadfastly developing high-end products. In recent years, Tangsteel has achieved positive results in high-end product development, with the variety of hot-rolled steels it can produce increasing from just a few years ago to over types today.

Developing new processes, conquering new technologies, and launching new products—over the past two years, new quality productive forces have been rapidly advancing in the steel sector. **Building a powerful "heart" for domestically produced large aircraft.** The manufacturing of aircraft engines requires alloys capable of enduring prolonged operation under high temperatures and stress. Pangang Group has overcome key technological challenges in high-temperature alloy products, supplying wide cold-rolled thin sheets of high-temperature alloy for domestically produced large aircraft engines, successfully replacing imports. **Enhancing the strength of new energy vehicle wheels.** Tai Steel has developed the world's highest-strength steel for automotive wheels, which has been successfully applied to new energy vehicle models of renowned domestic and international car brands. While ensuring wheel safety, lightweight design, durability, and aesthetics, the strength has been doubled, and wheel weight reduced. **Helping power transformers "shed weight."** Transformers are critical equipment in power systems. Shougang has successfully developed China's first high-strength steel for transformer shells, achieving a weight reduction of over % per transformer shell and significantly lowering manufacturing costs.

"In the new year, steel enterprises will further strengthen the research and development of new materials, new processes, and new technologies, producing more high-tech, high-value-added new products that effectively meet the needs of emerging fields, thereby further enhancing market competitiveness," said Jiang Wei, Vice Chairman and Secretary-General of the China Iron and Steel Association.

Structural Adjustment: Steel Demand in Manufacturing Continues to Grow, While Demand in Construction Expected to Marginally Improve

In the year, influenced by the deep adjustment of the real estate market, the proportion of steel used in China's construction industry further decreased to %. Meanwhile, the demand for steel in the manufacturing sector continued to grow, with its share increasing from % in the previous year to % in the current year, becoming a significant force driving demand growth. According to calculations by the Metallurgical Industry Planning and Research Institute, the steel consumption in the automotive and home appliance industries increased by .% and .% year-on-year, respectively.

"On [specific date] last year, the Central Politburo meeting deployed a package of incremental policies to drive economic growth and structural optimization, boosting market expectations for the steel sector," analyzed Jiang Wei. He noted that the continuous implementation and effectiveness of policies such as the "dual focuses" and "dual innovations" have effectively spurred growth in steel demand for industries like infrastructure, machinery, automobiles, and home appliances. Steel enterprises have felt this impact firsthand. Wang Juan shared with the author that in the fourth quarter of [specific year], Baosteel's orders for steel products used in home appliances saw a significant increase, with some products even doubling year-on-year.

How should the steel industry adapt to changing demands and take proactive measures? Explore new opportunities. In recent years, with the accelerated development of prefabricated buildings, the steel structure industry has seen significant growth potential. In [year], China's steel structure processing volume reached [number] million tons, a year-on-year increase of [percentage]%, accounting for approximately [percentage]% of crude steel production, with the proportion increasing annually. "Taking steel structure bridges alone, if [percentage]% of newly built bridges in China adopt steel structures instead of reinforced concrete in the future, the annual additional steel demand will exceed [number] million tons," said Zhang Longqiang, President of the Metallurgical Industry Information and Standards Research Institute. Promoting the application of steel structures will help stabilize the construction steel market, expand steel demand, and foster new industrial growth points.

Moving towards the mid-to-high end. "In recent years, the demand for high-quality steel in our country has been steadily increasing. Tang Steel has been striving to enhance the competitive advantage of product differentiation by adjusting the variety structure and resource allocation. Guided by the ranking of product profitability, the company has restructured its product portfolio, reducing the production of rebar and increasing the output of sheet metal, thereby boosting the production of high-profit steel for manufacturing," said Li Kun, Deputy Director of the Marketing Department at Tang Steel. Throughout the year, the sales of products such as container plates and galvanized high-strength steel have increased by % and % respectively, year-on-year.

Looking ahead to the year, Jiang Wei believes that steel consumption demand will see a mix of decline and growth, with quality improvements within the growth. Demand for different varieties will continue to diverge. Among them, as measures to stabilize the real estate market take effect, demand for construction steel is expected to marginally improve. The manufacturing sector will become the main driver supporting steel demand, particularly with the accelerated development of new energy, high-end equipment manufacturing, and the photovoltaic industry, which will boost demand for corresponding steel varieties.

Business Optimization: As the industry enters a phase of "reduced growth and stock optimization," it is essential to adhere to steady operations and achieve high-quality development.

"Over the past year, the steel industry has effectively met the higher demand for steel materials driven by China's economic transformation and upgrading. The momentum of 'stability' has continued, 'new' drivers are growing, and 'positive' factors are accumulating," said Yao Lin, vice president of the China Iron and Steel Association. At the same time, it is also important to recognize that factors such as weak demand and declining steel prices have brought certain pressures to steel enterprises. In the past year, China produced a total of [XX] billion tons of crude steel, a year-on-year decrease of [XX]%, achieving the expected target of reducing output. Meanwhile, due to insufficient effective demand and other factors, the apparent consumption of crude steel dropped to [XX] billion tons, declining by [XX] billion tons from the peak in [previous year]. Overall, the decrease in steel consumption was greater than the decline in production, and the market situation of strong supply and weak demand remained unchanged. In terms of prices, the average value of the China Steel Price Index (CSPI) in the past year was [XX] points, down [XX]% year-on-year.

"2023 is a critical year for the deep adjustment of the steel industry, with increasing downward pressure on traditional steel-consuming sectors and raw material prices that are more likely to rise than fall. The characteristics of the industry entering a phase of 'reduced volume development and optimization of existing capacity' are becoming increasingly evident," said Yao Lin. Facing the new situation, confidence must be upheld on one hand. "China's per capita steel stock and cumulative carbon dioxide emissions remain relatively low compared to developed countries. For a considerable period, China, still in the process of industrialization and urbanization, will continue to be the world's largest steel consumer and producer," Jiang Wei stated. "In recent years, steel enterprises have maintained relatively stable production and operations, with overall asset conditions remaining at a good level, providing a solid foundation for development," Yao Lin added.

On the other hand, it is essential to adhere to steady operations and achieve high-quality development characterized by higher efficiency, greater added value, and superior services. Maintaining resilience and strictly controlling production capacity is crucial. Yao Lin stated that market-oriented and rule-of-law approaches should be adopted to close the entry points for capacity and facilitate exit channels, thereby addressing the balance between total steel supply and demand. "At the same time, we should strengthen the monitoring and analysis of industry operations, guide enterprises to advance product mix adjustments, and arrange production rhythms reasonably to avoid homogenization and 'involution-style' vicious competition," he added. Zhang Haideng, a first-level inspector at the Raw Materials Industry Department of the Ministry of Industry and Information Technology, noted that the ministry is organizing relevant units to study and revise the implementation measures for steel capacity replacement. The focus will be on industrial upgrading directions such as supply-demand balance, green and low-carbon development, structural adjustments, layout optimization, and mergers and acquisitions, with the aim of further refining differentiated capacity replacement policies.

Optimize services and respond to demands. To bridge the "last mile" in serving customers, Tang Steel has established steel processing and distribution centers in Tianjin, Jilin, Zhejiang, and other locations, offering one-stop services in sales, processing, and storage. Acting as a link between steel enterprises and customers, these processing and distribution centers eliminate the intermediary steel traders, selling steel after cutting and processing, thereby achieving upstream and downstream integration and providing customers with more convenient and precise services. Kuang Shuang stated that Tang Steel now participates in the preliminary design of customer products in advance, directly connecting the steel research and development design process with customer needs. "For example, in the design of automotive components, we engage in pre-design for customers at the very beginning of car development, enabling production line engineers to quickly understand the market and build product advantages with a targeted approach. This customized service has strengthened Tang Steel's relationship with customers, with orders for ultra-high-strength steel increasing by more than %."

Expanding Overseas and Opening Up Markets. To address the decline in demand from some downstream industries, many steel enterprises have seized export opportunities to explore overseas markets. Last year, China's cumulative steel exports reached a certain number of billion tons, a year-on-year increase of a certain percentage. Internationalization is an important means to respond to the changing laws of the steel industry's development, adapt to the new trend of low-carbon transformation, and optimize global resource allocation. "Baosteel has always attached great importance to international development. In the first three quarters of last year, Baosteel's steel export contracts reached a record high of a certain number of million tons," said Wang Juan. Baosteel will continue to consolidate and efficiently utilize its overseas marketing network, leverage its technical and quality advantages, and persistently increase the sales of high-value-added and high-tech products in overseas markets.