China’s steel industry faced mounting cost pressures in the first half of 2026 as raw material, energy and environmental compliance expenses continued to rise. Geopolitical tensions in the Middle East pushed up oil prices, while stricter safety inspections disrupted coking coal supply, increasing production costs for steelmakers. 

Additional expenses related to electricity, logistics, environmental protection and carbon compliance further widened the gap between efficient producers and high-cost mills. 

As 2026 marks the first full compliance year for China’s steel sector under the national carbon emissions trading system, integrated steelmakers are facing higher carbon costs.

Industry analysts expect stricter environmental policies and carbon regulations to accelerate industry consolidation and the phase-out of inefficient production capacity.