“As China’s steel exports demand is going to decrease and manufacturing demand will also come under pressure, we have China’s crude steel production in 2025 down around 37 million mt year over year to 968 million mt, but the cut may need to be deeper [with the US reciprocal tariffs up to 145%], preferably closer to 75 million mt, in order to keep supply and demand in balance,” Paul Bartholomew, senior analyst at Commodity Insights, said.

Market talk has suggested that China is planning to mandate a crude steel production cut of 50 million mt in 2025 from 2024.

However, as of April 10, the central government remained muted over steel production cut measures for 2025.

As most steel mills are currently still operating at a profit, with hot-rolled coil sales margins at around Yuan 100-150/mt ($13.6-$20.4/mt) and rebar margins at around Yuan 50/mt, the average utilization rate at China’s blast furnaces reached around 90% as of early April, up from 86% in late February and around six percentage points higher year over year, according to market sources.

Some trading sources said given the downward pressure on China’s economic growth in 2025, it remains to be seen whether there will be government-mandated steel output cuts.

The ferrous metal smelting and processing industry accounts for 6.02% of China’s GDP and as of February employed around 1.745 million people, down 3.8% year over year, according to the National Bureau of Statistics.

However, they believe the rising steel production, coupled with shrinking demand, would drive steel prices lower in April and May, squeezing margins and leading to a decline in iron and steel production in the near future.

In tandem with the expectation of falling iron and steel production, sources said they expect the iron ore market to shift into surplus in the second half of 2025, further driving down iron ore prices.