China's 2026 steel demand set to drift lower as real estate slump offsets manufacturing gains
Chinese steel consumption has fallen about 17 percent from close to 1 billion metric tons in 2021 to 830 million metric tons in 2025, according to data from China's National Bureau of Statistics cited in industry analysis published on July 28, 2026. The decline reflects a deep adjustment in the real estate sector, which was once the largest downstream consumer of steel. During the 14th Five-Year Plan period (2021-2025), the real estate sector's share of total steel consumption fell from roughly 32 percent in 2021 to about 23 percent in 2025, with average annual real estate steel consumption down approximately 13 percent compared with the 13th Plan period. Official statistics for January to June 2026 show real estate development investment down 18 percent year on year, sales by floor area down 10.8 percent, and new construction starts down around 23 percent. Most industry estimates now project that 2026 consumption will remain largely rangebound or decline only marginally, with a slight construction improvement and stronger manufacturing demand providing partial offset.
Within manufacturing, the share of total Chinese steel demand rose above construction's share for the first time in 2025, according to the China Iron and Steel Association, reflecting both an economy-wide transition toward services and a reorientation within manufacturing toward new-age industries. Steel consumption in the automotive sector edged up 11 percent to around 65 million metric tons in 2025, with NEV sales rising 20 percent and supporting demand for electrical steel and high-end rolled products. The share of machinery and general engineering products in total steel demand has grown from 20 percent in 2010 to 30 percent in 2023, and wind power capacity additions continue to support demand for turbines and tower fabrication.
US EAF mills post strong Q2 profits on widening scrap spreads
Two large US electric arc furnace steelmakers reported robust second-quarter 2026 earnings in late July. North Carolina-based Nucor Corp. posted $1.1 billion in net income and Indiana-based Steel Dynamics Inc. reported $530 million for the April to June period. In its financial statements, Nucor indicated a spread of $723 per ton between its steel sale price and the cost of its ferrous scrap and direct-reduced iron raw materials, a margin that outpaced both the previous quarter and the second quarter of 2025. The Washington-based American Iron and Steel Institute reported that in the week ending July 25, 2026, US mills produced nearly 1.86 million tons of crude steel at an 80.5 percent capability utilization rate, up 4.9 percent from the comparable week in late July 2025 and 1.5 percent week on week. Analysts suggest that if European scrap demand returns in September and US EAF output holds near 80 percent capacity, recycled-steel processors could find themselves with greater pricing leverage.
European scrap supply tightens as Rhine logistics disrupt shipments
Scrap supply to European steelworks is being constrained by persistently low water levels on the Rhine River network. Johannes Hanke of the Germany-based BVSE steel recycling association told industry media in late July that low water levels will continue to disrupt waterway scrap deliveries to connected steelworks for at least another month. Mills in France, Germany, Italy, Luxembourg and Poland are nevertheless expected to pay between $6 and $45 per ton in late July and early August, in part because Europe's August manufacturing activity is seasonally slow. Turkish buyers, finding reduced European supply, are turning to US exporters, with at least one US exporter reportedly securing $5 per ton more even in a "weak" export environment, while Turkish domestic EAFs are also beginning to ramp up post-summer holidays.
India's SAIL sees lower coking coal costs but softer steel realisations
State-run Steel Authority of India Ltd. told analysts that imported coking coal costs are expected to fall by Rs 1,000-2,000 per tonne in the September quarter as global prices soften, coinciding with weaker steel prices during the monsoon period. SAIL's average net sales realisation in July stood at around Rs 55,600 per tonne, down from about Rs 57,100 per tonne in the June quarter, with flat-steel realisations around Rs 56,900 per tonne and long products around Rs 54,200 per tonne. Chairman and Managing Director Ashok Kumar Panda said long-product prices, which had corrected by roughly Rs 3,000, had begun recovering, with a Rs 500-2,000 rebound expected. First-quarter production was weaker than usual because SAIL advanced capital repairs at three plants—IISCO, Durgapur and Bokaro—but the company retained its full-year production and capex guidance and expects higher output in Q2-Q4. SAIL spent Rs 2,575 crore on capex in Q1 against a full-year target of Rs 15,000 crore. Surplus iron ore sales rose to 1.1 million tonnes in Q1 from 0.31 million tonnes a year earlier, generating Rs 574 crore in revenue, and SAIL is targeting around 8 million tonnes of surplus iron ore sales this financial year versus roughly 3.5 million tonnes last year.
Upcoming milestones to watch
Verifiable near-term checkpoints include the return of European scrap demand in September, the release of US EAF second-quarter mill-level production data, and SAIL's second-quarter results, which should reflect the planned Q1 maintenance completion, the anticipated Rs 1,000-2,000 per tonne reduction in imported coking coal costs, and any recovery in long-product realisations. China's July-August construction and property investment data will also clarify whether the marginal construction improvement flagged for 2026 is materialising.
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