China has committed to reducing its steel production capacity by 2026

China has committed to capping steel production capacity by 2026 as part of a broader campaign to eliminate excessive competition and stabilize the heavy industry sector, according to Mysteel Global.

The directive is included in the draft National Economic and Social Development Plan for 2026 and the corresponding report for 2025. The latter was submitted by the National Development and Reform Commission (NDRC) to the National People’s Congress in early March and subsequently officially approved.

The new plan emphasizes accelerating the modernization of industrial systems and developing new growth drivers with a strong focus on the real economy. The document calls for coordinated efforts to transform traditional industries, expand emerging sectors, and foster the development of “new, high-quality productive forces” adapted to local conditions.

For the steel industry specifically, this means tighter control over production capacity. The plan calls for an orderly reduction of capacity to achieve a stable balance between supply and demand, optimize the industrial structure, and significantly improve corporate profitability.

Last year, China accelerated the modernization of its steel industry, focusing efforts on addressing the problem of “involutionary” competition—market rivalry in which companies resort to excessive price cuts, overproduction, and cost-cutting to push out competitors, yet fail to actually improve efficiency, innovation, or product quality.

In 2025, government agencies introduced controls on steel production and stepped up capacity replacement programs. However, as noted in the NDRC report, this year’s strategy goes beyond simple capacity reduction. It calls for improved product quality, cost reduction, and decarbonization initiatives through technological transformation and modernization—this applies to the steel sector and other key industrial sectors.

Beijing intends to improve standardization systems, gradually phase out outdated and inefficient processes, and promote cutting-edge technologies. Expanding the use of artificial intelligence in key sectors will drive new advantages in green and digital development. These efforts, in particular, aim to reduce energy consumption and carbon emissions per unit of steel produced, providing significant support for China’s environmental commitments.

As a reminder, in January-February 2026, China reduced steel production by 3.6% year-on-year to 160.3 million tons.

In 2025, steel production in the country fell below the 1 billion-ton mark, reaching its lowest level since 2018. According to data from the National Bureau of Statistics of China, Chinese steelmakers produced 960.81 million tons of steel last year, a 4.4% year-on-year decrease. The decline was a result of the protracted crisis in the real estate market, which significantly curtailed domestic demand for steel products.