China to curb steel capacity in 2026, says NDRC in approved plan

The directive was contained in the Report on the Implementation of the 2025 Plan for National Economic and Social Development and on the 2026 Draft Plan for National Economic and Social Development. The report was submitted by the National Development and Reform Commission (NDRC) to the National People's Congress on March 5 and formally approved on March 12, the country's official news agency Xinhua reported on March 14.

As 2026 marks the first year of China's 15th Five-Year Plan period, the document carries significant weight for the country's economic trajectory. It emphasizes accelerating the modernization of industrial systems and cultivating new growth drivers, with a firm focus on the real economy. The plan calls for coordinated efforts to transform traditional industries, expand emerging sectors, and foster "new quality productive forces" tailored to local conditions.

For the steel industry, this translates directly into strengthened controls on productive capacity. The plan mandates orderly reductions in steel capacity to achieve stable supply-demand balance, optimize industrial structure, and significantly improve corporate profitability.

This builds on momentum from 2025, when China accelerated steel industry upgrades through efforts to address "involution-style" competition that has long plagued the sector, as Mysteel Global reported.  Involution-style competition refers to a self-defeating form of market rivalry where businesses engage in excessive price-cutting, overproduction, and cost-slashing to outcompete rivals, yet without actually improving efficiency, innovation, or product quality.

During last year, government authorities had placed controls on crude steel output and intensified capacity replacement programs. However, the strategy for this year extends beyond capacity reduction, the NDRC report indicates.

The plan also pursues quality enhancement, cost reduction, and decarbonization initiatives through technological transformations and upgrades targeting the steel sector and other key industries.

Authorities will improve standard systems, phase out outdated and inefficient processes, and promote advanced technologies, the report notes. Deepening artificial intelligence applications across key industries will foster new advantages in green and digital development, it suggests.

These efforts aim to reduce energy consumption and carbon emissions per unit of steel produced, providing strong support for China's carbon peaking goals, it says. Meanwhile, authorities will strengthen capacity governance in sectors including copper smelting, alumina, and coal chemicals while optimizing the layout of ethylene and paraxylene industries, ensuring a holistic approach to industrial transformation, it declares.

Written by Tiffany Hou, houtianhui@mysteel.com

Edited by Russ McCulloch, russ.mcculloch@mysteel.com