Steel market reactions to China's Two Sessions — its paramount annual political and economic gathering — were muted, as policy signals met market expectations.
The meeting conveyed a cautious economic stance, setting a 2026 GDP growth target of 4.5–5pc and a fiscal deficit ratio of around 4pc.
Supply
The "anti-involution" theme — a drive to curb excessive, self-defeating price competition across industries, including electric vehicles, solar and steel, by phasing out outdated capacity — resurfaced at this year's meeting. Introduced in July last year, the concept previously triggered a sharp rally in steel prices.
The National Development and Reform Commission (NDRC) released a 2025–26 work plan in September to stabilise steel industry growth. The plan called for precise control over capacity and output, while prohibiting capacity additions. It also seeks to promote market-based elimination of weaker participants to achieve a balance between supply and demand.
China's crude steel output fell by 4.4pc to 960.81mn t in 2025, according National Bureau of Statistics data. Market participants largely attributed the decline to market-driven adjustments rather than administrative intervention.
During this year's Two Sessions, the NDRC reiterated plans to further reduce capacity in steel, refining and other sectors. But the plans lack concrete production reduction targets and were viewed by some market participants as non-committal.
China's crude steel output fell by 3.6pc on the year to 160.34mn t in January–February, despite the absence of mandatory curbs.
Demand-side
The real estate sector — historically the largest consumer of steel — saw no significant policy support. Official statements emphasised "controlling new supply and reducing inventories", suggesting a continued focus on derisking rather than stimulus.
Infrastructure investment remains broadly stable. China plans to allocate 755bn yuan ($109.48bn) from the central budget, alongside Yn800bn in ultra long-term special government bonds. In addition, Yn4.4 trillion in local government special bonds will be issued to support major construction projects, replace implicit debt and clear government arrears. Overall, investment levels are largely in line with 2025.
Downstream demand from the manufacturing sector also appears to have limited upside. Key consumers of flat steel — including automobiles, home appliances and machinery — face reduced policy support this year.
Subsidies for automobiles and home appliances have been scaled back. The government work report proposed allocating Yn250bn in ultra-long special treasury bonds to support consumer goods trade-in programmes, down by Yn50bn from 2025. These funds serve as the primary subsidy pool, with autos and home appliances accounting for the bulk of eligible categories.
Support for machinery is largely unchanged, with Yn200bn in special bonds earmarked for large-scale equipment upgrading.
Outlook
This year's Two Sessions indicated that Beijing is wary of aggressive stimulus measures for 2026. The steel sector is likely to rely more on mills self-regulating their output, alongside market-driven consolidation, to navigate the ongoing adjustment period.
