Under the "cold wave" of tariffs, the global steel market is struggling to find a way to break the ice

Since the beginning of this year, the global steel market has been facing multiple pressures. Data from the World Steel Association shows that as the world's largest steel producer, China's crude steel output in February decreased by 3.3% year-on-year to 78.9 million tons; in February, global crude steel output decreased by 3.4% year-on-year to 144.7 million tons. Since March 12th, the United States has imposed a 25% tariff on all imported steel and aluminum, making the global trade environment more complex and affecting the volume and price of international steel trade. Factors such as weak demand and policy games are intertwined, jointly constituting the complex picture of the steel market at the beginning of 2025. In 2025, the steel industry will continue to explore a new balance among environmental compliance, cost control and global layout.

Weak Demand

In recent years, the real estate industries in many countries have remained sluggish. The continuous adjustment of China's real estate industry has curbed steel demand, which is also one of the important reasons for the decline in China's crude steel output. In key regions such as the United States, the European Union, Japan and South Korea, housing construction activities have dropped sharply since 2023 after an earlier growth period driven by low interest rates. As central banks in various economies have raised borrowing costs to combat inflation, this slowdown has affected the development of the construction industry, thereby reducing the demand for steel.

In addition, global manufacturing activities have remained weak. Households and enterprises are more cautious in investing in durable goods. High costs, economic uncertainties and a tightening financing environment have led people to adopt a wait-and-see attitude and postpone spending decisions, resulting in slow growth in the steel demand of the manufacturing industry. However, with the resilience of the global economy, the relaxation of the financing environment and the release of pent-up demand, it is expected that global manufacturing activities will recover in the future, thereby driving the growth of steel demand.

Tariff Impact

The U.S. government has continuously imposed tariffs on products such as steel, aluminum and automobiles. This trade protectionist act is an important factor currently affecting the global steel market, triggering a chain reaction in other economies.

On March 19th, the European Commission released the "Steel and Metal Industry Action Plan", proposing to tighten the existing steel safeguard measures starting from April 1st, 2025, aiming to enhance industry competitiveness and cope with the potential impact of U.S. steel tariffs. It is understood that the current safeguard measures of the European Union adopt a mechanism of steel import quotas, and 25% tariffs need to be paid for the part exceeding the quota.

Once Japan's steel and aluminum exports to the United States are blocked and domestic production capacity cannot be effectively digested, it will inevitably lead to a decline in output. On March 24th, Masayoshi Imai, president of Nippon Steel & Sumitomo Metal Corporation, said that the U.S. government's measures to impose tariffs on products such as steel, aluminum and automobiles may lead to a reduction of millions of tons in Japan's annual crude steel output within a year, with the total output dropping below 80 million tons. By then, Japan's annual crude steel output will drop to its lowest level in more than half a century.

For South Korea, the increase in tariffs may prompt South Korean steel companies to readjust their market layouts and look for new export destinations. The United States was once an important steel export market for South Korea. In 2024, exports to the United States accounted for about 13% of South Korea's total steel exports. According to the Korea-U.S. Free Trade Agreement signed in 2018, South Korea can enjoy an annual tax-free quota of 2.63 million tons of steel exports to the United States, but this quota has also been cancelled this time. Recently, Hyundai Steel, South Korea's second-largest steelmaker, announced that it has entered a state of "emergency management", which shows that the pressure on South Korea's steel industry is inseparable from the U.S. tariff policy.

In addition, Malaysia will extend the suspension order on steel investment. Recently, Malaysia announced the extension of the suspension order on steel investment, which was implemented for two years starting from August 15th, 2023 and was due to expire in August this year.

Industrial Restructuring

At the beginning of 2025, while the global steel market is facing the "cold winter" of shrinking demand due to trade protectionism, it will also "break the ice" for technological innovation and green transformation.

China's green and low-carbon transformation is gradually deepening. On February 21st, the "Opinions on Promoting Voluntary Disclosure of Corporate Greenhouse Gas Information" was promulgated, proposing to steadily promote the voluntary disclosure of corporate greenhouse gas information. Industries such as steel and aluminum smelting are key industries for greenhouse gas emissions in China. Through the construction of a series of disclosure mechanisms, the development mechanism of green and low-carbon development will be accelerated. On March 26th, the Ministry of Ecology and Environment released the "Work Plan for the National Carbon Emission Trading Market to Cover the Steel, Cement and Aluminum Smelting Industries", and the steel industry was officially included in the national carbon emission trading market.

The European Union is optimizing the development of the steel industry. On February 26th, the European Commission released the "Clean Industry Pact". Under the "Industrial Decarbonization Accelerator Act" of the "Clean Industry Pact", the European Commission will introduce voluntary carbon intensity labels for industrial products, starting with steel in 2025 and then cement. This initiative aims to accelerate the access of energy-intensive industries to clean energy. Such labels will enable industrial producers to distinguish the carbon intensity of their production activities and benefit from targeted incentive measures. It is reported that the carbon intensity label for steel will be developed based on existing industry reports.

Japan's steel industry is actively promoting low-carbon transformation through technological innovation in hydrogen metallurgy. According to Hiroyuki Murakami, technical advisor of the Japan Iron and Steel Federation Industrial Alliance, current Japanese steel companies are promoting industry transformation through technological innovations such as hydrogen metallurgy. The COURSE50 project and the Green Innovation Project for Steelmaking, funded by the New Energy and Industrial Technology Development Organization of Japan, are gradually becoming the driving engines for the transformation of Japan's steel industry. It is reported that the COURSE50 project was launched in 2008, aiming to develop hydrogen reduction technology that can be applied in blast furnaces.

Currently, the global steel market is facing challenges such as the adjustment of demand structure and the rise of trade protectionism, as well as new opportunities brought by the growth of emerging market demand and green transformation. Although the steel market may still advance in the fluctuations of output and price in the short term, from a long-term perspective, with the gradual recovery of the global economy and the continuous optimization of the industrial structure, the steel industry is expected to achieve more stable and sustainable development through technological innovation, capacity optimization and market expansion.

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