The 2026 Government Work Report explicitly outlined the goals to “develop new quality productive forces according to local conditions” and “accelerate the construction of a modern industrial system,” charting the course for the transformation and upgrading of the steel industry. Driven by both policy guidance and market demand, China’s steel industry is accelerating its transition towards high-end, intelligent, and green development, using technological innovation as an engine and green, low-carbon practices as a core theme, providing solid support for building a manufacturing powerhouse.
I. Policy Dividends Unleashed, Industry Embraces New Opportunities
This year’s government work report listed “promoting the transformation and upgrading of traditional industries” as a key task, explicitly stating the plan to “allocate 200 billion yuan in ultra-long special treasury bonds to support large-scale equipment upgrades.” This policy dividend injects strong momentum into the technological transformation of the steel industry. Data from the China Iron and Steel Association (CISA) shows that in 2025, the numerical control rate in key processes of China’s steel industry reached 72%, and R&D investment intensity among key enterprises hit 2.1%, an increase of 0.3 percentage points from the previous year.
“The policy support is unprecedented, especially in the fields of intelligent manufacturing and green, low-carbon development,” said Li Yi, President of the Strategic Research Institute of HBIS Group. He revealed that the company has received over 500 million yuan in special funds for its hydrogen-based shaft furnace project. “This marks a substantial step for China’s steel industry towards ‘hydrogen replacing coal’ in green smelting.”
In terms of tax incentives, the new policy raising the additional deduction ratio for R&D expenses to 120% is expected to reduce the annual burden on steel enterprises by over 3 billion yuan. A relevant person in charge from Shougang Co., Ltd. revealed that the company will reinvest all the saved funds into the R&D of new vanadium and titanium materials, aiming to seize the high ground in the high-end metal materials market.
II. Technological Innovation Leads, Product Structure Continuously Optimized
The report emphasizes “promoting R&D and applications of AI+ and quantum technology to lead globally,” and the steel industry is accelerating the transformation of cutting-edge technologies into productivity. The high-strength automotive sheet, globally launched by Baowu, has passed Tesla’s certification, achieving domestic substitution. Ansteel’s deep-sea pipeline steel has been successfully applied in the Lingshui gas field in the South China Sea, breaking foreign monopolies.
In the high-end equipment sector, TISCO’s 0.015mm “hand-tearable steel” has reached a new thickness low and is used in core components of foldable screen phones. CITIC Special Steel’s special bearing steel supports the domestication of the landing gear for the domestic large aircraft C929. Data shows that in 2025, the self-sufficiency rate of high-end sheet metal in China’s steel industry exceeded 85%, and the proportion of special steel output rose to 18%.
Digital transformation has achieved remarkable results, with 82 steel companies having built smart factories, boosting average production efficiency by 30%. In the central control room of Masteel’s Wisdom Park, engineers use a 5G+ industrial internet platform to monitor and control production lines thousands of miles away in real-time; “one-click steelmaking” has become standard.
III. Green Transformation Accelerates, Building a Circular Economy System
Facing the hard target of “reducing energy consumption per unit of GDP by 5.1%,” the steel industry has launched a green revolution. Baosteel’s Zhanjiang base has taken the lead in achieving ultra-low emissions across the entire process, with comprehensive energy consumption per ton of steel dropping to 540 kg of standard coal. Jianlong Xigang’s 100MW photovoltaic power station generates enough electricity annually for 100,000 households.
The scrap steel recycling system is rapidly taking shape. In 2025, national scrap steel consumption exceeded 300 million tons, and the proportion of electric arc furnace steel output rose to 15%. In Zhangjiagang, Shagang Group’s “urban mining” base processes 100,000 end-of-life vehicles annually, achieving a metal resource recovery rate of 98%. This “squeezing every drop” production model has reduced carbon emission intensity per ton of steel by 12%.
Hydrogen metallurgy demonstration projects are emerging in multiple locations. HBIS Zhangxuan Technology’s world-first industrial production unit for direct reduction of iron using hydrogen-rich gas operates stably, reducing CO2 emissions by 60%. With the launch of the national-level hydrogen energy industry fund, hydrogen metallurgy production capacity is expected to exceed 5 million tons by 2027.
IV. Market Demand Diversifies, Structural Adjustment Urgent
While infrastructure investment drives demand for long steel products, demand from the real estate sector remains persistently low. CISA data shows that the proportion of construction steel fell to 42% in 2025, while demand from automotive, machinery, and shipbuilding sectors grew by 11%. “The market is forcing companies to adjust their product mix,” explained Zhang Zhigang, Sales Director of Valin Steel. The company has increased the proportion of high value-added sheet production capacity to 65%.
The export landscape is also changing. In 2025, steel exports reached 82 million tons, with the share of high value-added products exceeding 50% for the first time. Surging demand for galvanized sheets and color-coated coils in emerging markets like Southeast Asia and the Middle East is prompting Chinese steel enterprises to accelerate the布局 of overseas production bases.
Under the constraints of the “dual carbon” goals, demand for energy-efficient building materials is strong. Shougang’s low thermal conductivity refractory materials can save 15% energy for steel plants and have been promoted and applied in 12 enterprises. This shift from product supplier to solution provider is becoming a new industry trend.
V. Challenges Persist, Innovation Ecosystem Needs Improvement
Despite significant progress, the industry faces multiple challenges. Academician Yin Ruiyu of the Chinese Academy of Engineering pointed out, “The situation where key core technologies are controlled by others has not fundamentally changed; high-end bearing steel, tool and die steel, etc., still rely on imports.” Data shows that among the top 10 materials with the highest import dependence for China’s steel industry in 2025, seven still fall under the special steel category.
Rising environmental costs are squeezing profit margins. Industry environmental protection investment reached 180 billion yuan in 2025, a year-on-year increase of 15%. Some small and medium-sized enterprises (SMEs) face the dilemma of “dying if they don’t transform, and dying if they do.” In response, the Ministry of Industry and Information Technology (MIIT) stated it would establish a 20 billion yuan special fund to support the green transformation of SMEs.
International competition is intensifying. Following the implementation of the EU’s CBAM carbon tariff policy, China’s steel export costs have increased by approximately 4%-8%. “We must accelerate the establishment of a carbon pricing system with Chinese characteristics,” urged Fan Tiejun, President of the China Metallurgical Industry Planning and Research Institute, advocating for enhancing international influence through the linkage of the national carbon market and green finance.
Looking towards the 15th Five-Year Plan period, the blueprint for the steel industry is already drawn. The government work report proposes “creating new forms of the intelligent economy.” The steel industry will focus on three key tasks: first, building 10 world-class smart factory benchmarks to achieve full-process digital control; second, making breakthroughs in the application of key technologies like 6G communication and quantum sensing in steel scenarios; third, constructing a full life-cycle industrial chain covering “urban mining – green smelting – recycled materials.”
“We are confident in building a globally leading steel industry system by 2030,” said Tan Chengxu, President of CISA. Through continuous technological innovation and structural optimization, Chinese steel will shift from scale advantage to quality advantage, laying a solid foundation for achieving the goal of becoming a manufacturing powerhouse.
Chang Jiwen, Deputy Director of the Institute for Resources and Environmental Policies under the Development Research Center of the State Council, pointed out three major trends in the steel industry’s development: first, technological innovation shifting from following to leading; second, green transformation shifting from passive to proactive; third, market competition shifting from scale to quality. The data and policy directions disclosed in the report provide a clear roadmap for high-quality industry development.
Reprinted from steel.com
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