China’s Steelmakers Turn Overseas as Domestic Demand Slumps

China’s steel exports have been growing strongly. In the first quarter of 2025, China exported 27.43 million tonnes of steel, a 6.3% increase year-over-year and the strongest Q1 in its customs records. At the same time, steel billet exports have surged to record highs, as domestic high furnace capacity remains high but demand from traditional downstream sectors like construction stays sluggish.

Steelmakers are relying on volume over margin, using low-cost pricing to secure export orders even as profitability weakens at home. The pattern is described by market observers as “以质换量” (trading quality for quantity): producers are supplying less-profitable but standard or semi-finished products to foreign buyers to maintain production and cash flows.

But this strategy carries risks. Semi-finished steel exports, while alleviating domestic inventory, do not generate the value-add that finished steel products do, potentially limiting long-term earnings. Domestic industry groups have raised concerns that excessive billet exports may drain energy and resources, undermining China’s capacity to upgrade its steel sector in the long run.

At the same time, trade tensions are mounting. Many steel-importing countries remain wary of cheap Chinese steel, especially as China's export footprint grows in regions like Southeast Asia, the Middle East, and Africa. With China exporting to over 70% of its steel markets in Asia, the risk of anti-dumping investigations or tariffs is nontrivial, especially as Chinese pricing remains highly competitive.

In response, Chinese steelmakers are looking beyond just exports: some are planning overseas capacity investments, particularly in Southeast Asia, where they can build locally to evade trade barriers. This "capacity going abroad" strategy may mitigate export risk but also requires significant capital, operational capability, and geopolitical risk management.