China’s largest steelmaker, Baoshan Iron & Steel Co, commonly known as Baosteel, has indicated that nationwide production cuts are likely this year. The company, part of the state-owned China Baowu Steel Group, is facing significant challenges due to overcapacity and declining demand within the industry. Cai Yanbo, Baosteel’s deputy general manager, mentioned during a first-quarter earnings briefing that the likelihood of cuts has been acknowledged in government reports. He highlighted market speculation suggesting a reduction of up to 50 million metric tons of crude steel output.
However, Cai emphasized that he does not foresee immediate implementation of these cuts and has called on authorities to avoid a blanket approach in managing output. Implementing such extensive production cuts would be critical for rebalancing the steel market, potentially stabilizing steel prices and impacting the costs of steelmaking raw materials. Although Beijing has articulated plans to restructure the steel sector through production reductions, specifics regarding timing and extent remain unclear. Furthermore, Baosteel’s chairman, Zou Jinxin, projected that steel exports would decline by 15 million tons in 2025 due to increasing tariffs, with a further reduction of 20 million tons from indirect steel exports—goods like containers, vehicles, and machinery that use steel in their production.
He anticipates that the government will introduce additional stimulus measures to mitigate external pressures. In 2024, China’s steel exports reached a nine-year peak of 110.72 million tons, while Baosteel itself achieved record steel exports of 6.07 million tons last year. However, Zou noted a projected 2% decrease in domestic steel consumption for 2025. Despite these challenges, Baosteel reported a 26.4% increase in net profit for the first quarter, aided by reduced costs.
The company’s shares rose by 5.7% to 7.02 yuan ($0.9622) following the announcement.