China’s Steel Industry’s “Anti-Involution” Efforts Enter Deep Water! Key Directions for 2026
At present, “anti-involution” has become a consensus across the entire steel industry. The 2026 Government Work Report proposed to carry out in-depth rectification of “involutionary competition”, sending a clear signal to regulate the development of the industry. This means that “anti-involution” has become one of the important measures to deepen reforms in key sectors. Zhao Minge, Secretary of the Party Committee and Chairman of Shougang Group, believes that the steel industry boasts an excellent tradition, with strengths including consistent emphasis on technological innovation, customer demand and industrial restructuring, which will surely serve as the foundation for breaking the “involution” dilemma.
As a large-scale, heavy-asset traditional industry, the steel sector has long been trapped in vicious competition characterized by “competing over output, prices and product varieties”. A prominent feature of the 2026 Government Work Report is the combination of “anti-involution” and “setting new development anchors”, which not only confronts deep-seated contradictions but also reshapes the growth logic through extraordinary measures. From the central government’s first proposal to prevent “involutionary competition” in 2024, to clarifying comprehensive rectification in 2025, and then upgrading to in-depth rectification in 2026, the policy wording has shifted from “early warning and prevention” to “key tackling and deepening” in just two years. This reflects stronger enforcement, tougher measures and a longer-term rectification cycle, making the cultivation of a high-quality competitive ecosystem the top priority for the steel industry.
The Root Cause of Involution Lies in the Industry’s “Three Highs and Three Lows” Predicament
The 15th Five-Year Plan period is crucial for China’s steel industry to achieve the leap from “scale leadership” to “value leadership”, advance the high-end, intelligent, green, integrated and internationalized transformation, strengthen product brand building, and accelerate the shift from “steel production to material supply and manufacturing to service provision”. However, China’s steel industry is mired in the quagmire of “three highs and three lows”: high output, high costs and high exports, coupled with low demand, low prices and low efficiency.
The “anti-involution” drive in the steel industry is not a short-term response but a long-term transformation. First, the external environment no longer tolerates involution. Intensifying trade frictions pose direct pressure, the entry into force of the Carbon Border Adjustment Mechanism (CBAM) presents a long-term challenge, and the recovery of global production capacity is a competitive reality. At present, the most direct manifestation of “involutionary competition” is the dilemma of “rising export volume but falling prices” in overseas markets. The old mindset of “dumping excess domestic products abroad” is no longer feasible and will only trigger fiercer countermeasures. Second, domestic demand cannot sustain further involution. China’s steel consumption is shifting from “civil engineering steel” to “industrial steel”. In particular, steel demand for real estate is trending downward, while demand from the manufacturing sector is rising structurally. This transformation requires the supply side to match products with higher standards and higher added value. Third, the industry itself can no longer afford involution.
Involution Features the Intertwining of Passive and Active Behaviors
During the 14th Five-Year Plan period, China’s apparent consumption of crude steel dropped by nearly 200 million tonnes, an extremely severe challenge for any country. Against this backdrop, involution in China’s steel industry features the intertwining of passive and active behaviors. “Passive involution” stems from long-term pressure of contracting demand: following the peak of total domestic steel consumption, demand has fluctuated downward. Affected by local fiscal and employment pressures, coupled with high inventories and cash flow strains, some enterprises have to cut prices to survive, prioritizing market share over profits. Meanwhile, involution in downstream industries such as automobiles and photovoltaics has spilled over to the upstream, further intensifying competition.
“Active involution” is reflected in a small number of enterprises taking chances, ignoring the grim reality of declining demand, blindly expanding production, snatching orders at low prices, and even engaging in illegal production, severely disrupting industry order. Currently, involution remains a prominent problem in the steel industry, and the key to solving it lies in optimizing the industrial environment, with production capacity governance as the top priority.
From the first proposal of comprehensively rectifying “involutionary competition” in the 2025 Government Work Report to in-depth rectification in the 2026 version, the shift from “comprehensive” to “in-depth” underscores stronger enforcement, tougher measures and a longer duration. It also sends a clearer policy signal to the market: fostering a high-quality competitive ecosystem to guide and force enterprises to abandon homogeneous, inefficient development and competition models.
Driven by market-based mechanisms, the “survival of the fittest” in the steel industry has accelerated. Enterprises must transform from simply “selling products” to providing in-depth “services and solutions” to regain their due bargaining power in the industrial chain squeezed by upstream and downstream sectors.