Tiger Gao: “Türkiye becomes an important transit hub for Chinese steel entering the European market”

According to Gao, the Türkiye and Middle East markets are becoming increasingly important for Chinese steel. He emphasized that Türkiye, in particular, is rising as a key transit and re-export hub for trade directed to the European market. Gao also emphasized that the Simandou iron ore project could change cost balances in the global raw material market. In addition, he stated that capacity control and carbon reduction policies in China are reshaping production and investment decisions in the steel sector.

Following the reopening after Chinese New Year, what were the first effects on steel demand and prices?

The core operating logic of China’s steel market after the 2026 Spring Festival is not low inventory driven by demand, but a supply-demand mismatch caused by steel mills’ active production control. The slow resumption of work in downstream sectors has become a key constraint on the demand side. Prices show a differentiated pattern, with long products remaining strong while flat products stay weak. This pricing structure is directly transmitted to the Türkiye and Middle East regional markets, supported by clear price gaps between domestic ex-factory prices and overseas landed prices.

From a supply-side perspective, the weekly average inventory accumulation of rebar after the festival was only 117,500 tons, marking the lowest level for the same period in the past five years. This situation was not caused by strong terminal demand, but by active capacity reductions at 137 key steel mills nationwide. Their weekly rebar output reached 1.7038 million tons, representing a 13.47% year-on-year decrease. In comparison, weekly output during the same period of 2025 was 1.969 million tons, reflecting strict production control by steel mills. Mills generally delayed the resumption of production and carefully managed the pace of capacity release, mainly due to weak industry profitability combined with expectations of stable policy conditions. In order to avoid intense internal competition, many companies prefer a strategy of balancing sales volume through price.

Demand recovery has been significantly weaker than in previous years and has become an important constraint on the market. Apparent consumption of rebar recorded a sharp 38.8% year-on-year decrease, while the return rate of construction sites remained below 60%. Terminal procurement entities generally adopted a wait-and-see approach, and the traditional post-festival period of intensive inventory replenishment did not materialize. Capital market sentiment showed only limited improvement and lacked strong trend-driven momentum.

Price differentiation has been clear. Long products performed relatively strongly under the influence of production control by steel mills, with rebar prices maintained within the range of 3060-3080 yuan per ton (compared to 3200-3250 yuan per ton during the same period in 2025, representing an approximately 4% year-on-year decrease). In contrast, flat products remained weak due to sluggish domestic demand, with hot rolled coil prices staying at 3210-3230 yuan per ton (compared to 3350-3380 yuan per ton in the same period of 2025, also representing an approximately 4% year-on-year decrease).

In the Türkiye and Middle East markets, the landed price of Chinese rebar is approximately USD 510 per ton, while the landed price of hot rolled coil is around USD 520 per ton, creating a direct price linkage with the domestic Chinese market. This market structure has a clear and significant transmission effect on the Türkiye and Middle East markets, producing differentiated impacts between long and flat products.

For long products, production control by Chinese steel mills has reduced export supply, keeping export quotations firm. This situation has directly increased the willingness of local mills to resume production. The regional supply structure of long products has shown marginal improvement, with the operating rate of local rebar production lines in Türkiye increasing by around 5% month-on-month.

For flat products, weak domestic demand has pushed Chinese mills to offer greater profit concessions in export markets. As a result, a large volume of flat product supply has flowed into the Türkiye and Middle East markets. Regional flat product supply increased by approximately 12% month-on-month, while prices faced significant pressure, decreasing by about 3% month-on-month.

Overall, the post-festival pricing structure of China’s steel market, characterized by supply control and delayed demand recovery, has become the key driver behind recent steel price fluctuations in Türkiye and the Middle East. As a result, regional market trends have formed a strong linkage with the Chinese market.

The Simandou project will decrease the global iron ore price benchmark

How is the Simandou Project affecting raw material price balance and supply security?

The Simandou Project in Guinea is not simply an iron ore supply expansion project. It is a development that systematically reshapes the structure of China’s and even the global steel raw material market across four key dimensions: supply structure, pricing power, production cost and green competitiveness. In 2026, the project is entering a critical stage of capacity release. While it provides multiple benefits for the raw material security, cost control and green development of China’s steel industry, it also creates long-term development opportunities for the steel markets in Türkiye and the Middle East. However, the implementation and operation of the project still face potential risks, including political instability in Guinea and the slow progress of supporting infrastructure construction, both of which need to be closely monitored by the industry.

In terms of core capacity data, the supply scale of high-grade iron ore from Simandou is expected to reach 120 million tons in 2026. The iron ore grade will remain stable at above 65%, while quarterly shipment volumes are estimated at around 30 million tons. Shipments are mainly transported from Guinea’s Matakong Port to China’s coastal ports such as Rizhao and Qingdao, with sea freight costs of approximately USD 18-20 per ton, lower than the USD 22-25 per ton cost of Australian and Brazilian iron ore. This supply volume represents about 10% of China’s total iron ore imports and is becoming an important new source for China’s iron ore supply.

The project is expected to significantly reduce China’s long-term dependence on the two major iron ore suppliers, Australia and Brazil. The share of China’s iron ore imports from these two countries is projected to decrease from around 75% to approximately 65% in 2026. As a result, China’s strategic raw material supply security will improve, the duopoly structure of the global iron ore supply market will weaken, and a new tripartite structure centered on Australia, Brazil and Guinea is likely to emerge in the global iron ore market.

In response to the increasing supply from Simandou, Australian and Brazilian iron ore producers have already begun implementing countermeasures such as moderate price adjustments and grade improvements. As a result, the benchmark PB fines price decreased by approximately USD 3 per ton in the first quarter of 2026.

From a pricing perspective, the additional supply of high-grade iron ore from Simandou is expected to directly push the global iron ore price center downward. The mainstream iron ore index (62% Fe) is projected to move within the range of USD 85-95 per ton in 2026, representing a decrease of approximately 6%-16% compared with 2025, when the index ranged between USD 95 and USD 113 per ton.

The decline in raw material prices directly reduces steel production costs. Specifically, the cost of hot metal per ton of steel is expected to decrease by approximately USD 8-12, which effectively improves the profitability of steel producers and provides important support for profit recovery across the industry. The delivered cost of Simandou iron ore to Chinese mills is estimated at around USD 103-115 per ton, roughly USD 5-8 per ton lower than Australian and Brazilian iron ore of similar grade, creating a clear cost advantage.

From a green development perspective, the application of high-grade Simandou iron ore offers significant low-carbon benefits. Due to its high grade and low impurity content, it can reduce carbon emissions per ton of steel by approximately 4.5% in the blast furnace smelting process. This advantage will help Chinese steel producers better cope with green trade barriers such as the EU’s Carbon Border Adjustment Mechanism (CBAM), strengthen the green competitiveness of Chinese steel products in the global market and support the broader low-carbon transformation of the global steel industry.

For the steel markets in Türkiye and the Middle East, the long-term benefits of the Simandou Project are reflected in several aspects. First, at the raw material supply level, the sources of iron ore available to regional steel mills will become more diversified, reducing dependence on traditional suppliers and significantly improving raw material cost stability. As a result, the average iron ore procurement cost of regional steel mills is expected to decrease by approximately 4% in 2026.

Second, as Chinese steel producers expand their cost advantages, export quotations are expected to remain more resilient. This reduces the likelihood of extreme low-price dumping and helps maintain a more stable price competition structure in the regional market.

Third, a more balanced and stable global iron ore supply system will create a better external environment for steel production in Türkiye and the Middle East. This will help reduce operational risks caused by sharp raw material price fluctuations, with the volatility of regional iron ore prices expected to narrow from around 20% in 2025 to approximately 15% in 2026.

Overall, the more balanced and stable global iron ore supply system driven by the Simandou Project is expected to generate long-term benefits for steel producers in China, Türkiye and the Middle East

The impact of US tariffs has directed China toward the Middle East and Türkiye

How have US tariffs affected export market distribution and pricing?

Although the high tariffs imposed by the United States on Chinese steel have had limited direct impact, their effect on the restructuring of global steel trade flows has been extremely significant. These tariffs have not suppressed the total volume of China’s steel exports. Instead, they have accelerated a deep adjustment of China’s export market structure, driving the shift of Chinese steel exports toward the Middle East, Türkiye, Southeast Asia and other regions, while also forcing Chinese enterprises to adjust their export pricing strategies. As a result, Türkiye and the Middle East have not only become key growth markets for Chinese steel exports but have also emerged as important transit hubs for Chinese steel entering the European market.

From the perspective of direct impact, high tariffs exceeding 25% have effectively closed the US market to Chinese steel. Currently, the share of China’s steel exports to the US is less than 2%, and tariff costs have completely eliminated the price competitiveness of Chinese steel in the US market. As a result, exports to the US have largely stagnated. In 2025, China’s steel exports to the US remained at only around 1.8 million tons, mainly consisting of high value-added products.

The redistribution of export markets has therefore become the central change. Affected by the closure of the US market, Chinese steel producers have increasingly shifted their focus toward emerging markets. In 2025, China’s steel exports to the Middle East and Türkiye reached approximately 28 million tons, representing a year-on-year increase of more than 20%.

To avoid global trade barriers, Chinese enterprises commonly adopt trade methods such as re-export and bonded warehousing operations. However, these arrangements increase export operating costs by approximately 8%-12%. In order to maintain market share, companies have been forced to adjust their pricing strategies. As a result, sacrificing price to maintain volume has become the dominant approach, leading to a year-on-year decrease of around 8% in the average export price of Chinese steel, which stood at approximately USD 420 per ton in 2025.

The Türkiye and Middle East markets have become central regions affected by this restructuring of global steel trade flows, experiencing both disruptions and opportunities. On the one hand, the large influx of Chinese steel has intensified price competition in the region, weakened the pricing power of local mills and compressed profit margins. On the other hand, Türkiye has become an important transit point for steel flows between Europe and the Middle East. The growth of re-export activities has stimulated related sectors such as logistics and warehousing. In 2025, approximately 5 million tons of Chinese steel were re-exported through Türkiye.

From a long-term perspective, the impact of US tariffs is expected to persist. As a result, the market focus of China’s steel exports will increasingly shift toward the Middle East and Türkiye.

CBAM has decreased China’s exports to the AB

How have increasing anti-dumping investigations and the EU CBAM affected competition and Chinese producers?

China’s steel exports are currently under the dual pressure of global anti-dumping investigations and the EU’s CBAM carbon barrier. These constraints have become a key driver accelerating the transformation of China’s steel industry from a low-price, volume-oriented model to a low-carbon, high-quality model. Differentiation within the sector has intensified, while China’s export flows have increasingly shifted toward buffer markets such as Türkiye and the Middle East. At the same time, several countries in the region have begun exploring related carbon trading policies, with localized carbon barriers expected to be introduced between 2027 and 2028.

At the anti-dumping level, the number of global investigations targeting Chinese steel increased by 18% year-on-year in 2025, reaching 33 cases. These measures primarily target lower-segment products, creating export barriers for products such as hot rolled coil, wire rod and structural steel. In contrast, the share of higher-end products such as automotive sheet and electrical steel has increased due to technological advantages. Exports of automotive sheet reached 8.5 million tons in 2025, representing a 15% year-on-year increase.

The official implementation of the EU CBAM from 2026 has already created a structural impact. In terms of carbon emissions, mainstream Chinese blast furnace steel produces approximately 2.0-2.2 tons of emissions per ton of steel, significantly higher than the 0.4-0.6 tons typical for EU electric arc furnace steel. Based on the current carbon price of approximately EUR 90 per ton of CO2, export costs for Chinese companies shipping to the EU are expected to increase by EUR 140-160 per ton, significantly increasing cost pressure. In the second half of 2025, a clear wait-and-see sentiment and order delays emerged in EU-bound shipments, with order volumes decreasing by approximately 20% quarter-on-quarter. Chinese companies are currently responding through technological pathways such as hydrogen-based steel production.

This situation has a dual impact on the Türkiye and Middle East markets. In the short term, a large volume of standard Chinese steel products has flowed into the region, intensifying price competition in lower-segment products and putting pressure on the profitability of local mills. In the long term, however, the entry of higher-quality and lower-carbon Chinese products is introducing advanced production technologies to the regional market and encouraging industrial upgrading. In addition, Türkiye has become an important re-export hub for Chinese companies seeking to mitigate the impact of EU CBAM barriers. Processing low-carbon steel in Türkiye before exporting to the EU could effectively reduce the impact of carbon taxation.

Traditional capacity expansion investments have been replaced by hydrogen investments

How have capacity control and carbon reduction policies affected production and investment?

The direction of capacity control and carbon emission reduction policies in China’s steel industry is very clear. A policy framework focused on strict control of new capacity, capacity replacement reductions and green low-carbon development is shaping both production behavior and investment direction.

At the production level, policies impose strict constraints. A capacity replacement ratio of 1.5:1 or higher is required for new capacity, rising to as high as 2:1 in key regions. China’s crude steel production has decreased for two consecutive years. In 2025, production reached 1.03 billion tons, representing a 2.8% year-on-year decrease. The industry’s capacity utilization rate has remained stable within a reasonable range of 78%-82%.

At the investment level, the direction has shifted significantly. In 2026, green investments are expected to account for more than 60% of total investment in China’s steel industry. These investments are primarily focused on areas such as hydrogen-based steel production and smart industrial upgrades. Traditional investments aimed at expanding capacity have largely stalled, with investment scale decreasing by more than 90% compared with 2020.

Structural changes on the demand side are also reinforcing this strategy. The real estate and infrastructure sectors are experiencing weak recovery. In 2025, new housing starts decreased by 20.4% year-on-year, with a further decline of around 10% expected in 2026. Infrastructure investment is gradually shifting away from traditional areas such as roads and bridges toward new infrastructure sectors including 5G and new energy. However, these new categories generate relatively limited demand for traditional steel products such as long products.

These regulatory adjustments have also produced positive spillover effects for Türkiye and the Middle East. China’s steel supply has become more controllable, helping reduce global price volatility and supporting regional market price stability. In addition, the carbon reduction efforts of Chinese steel producers are providing a benchmark for the low-carbon transformation of the regional steel industry.

How do EAF (Electric Arc Furnace) growth and scrap price fluctuations affect your cost structure?

The gradual increase in the share of electric arc furnaces in China has led to adjustments in the domestic cost structure. However, its impact on the global scrap steel market remains limited. The widespread market perception that China’s EAF expansion is driving global scrap prices higher is largely a misinterpretation. China’s scrap steel market is highly self-sufficient, with extremely limited imports and relatively low EAF capacity utilization rates.

This conclusion is supported by several key data points. First, scrap imports are almost negligible. In 2025, China’s imports of recycled steel raw materials decreased by 53.45% year-on-year to only 248,100 tons. By comparison, China’s annual domestic scrap consumption is approximately 280 million tons, meaning imports account for less than 0.1% of total consumption.

Second, domestic scrap self-sufficiency exceeds 99%. In 2025, China’s scrap resources reached approximately 320 million tons, significantly exceeding actual consumption levels.

Third, EAF operating rates remain relatively low, at around 51%. The main reasons include high electricity costs and unstable supply of high-quality scrap.

Fourth, from a global trade perspective, Türkiye imported 24.6 million tons of scrap in 2025, while China’s scrap imports were only about 1% of Türkiye’s level.

For EAF mills in Türkiye and the Middle East, China’s development does not create significant cost pressure. On one hand, China’s expansion will not push global scrap prices upward, meaning raw material costs are unlikely to increase for this reason. On the other hand, some lower-cost Chinese EAF products, such as wire rod and structural steel, may enter regional markets and compete with local lower-segment products on price. However, this represents competition in capacity and pricing rather than competition for raw material resources.