Driven by economic transformation and policy regulation, "anti-involution" has become a key issue in reshaping the competitive landscape of China's industry. As a pillar of the manufacturing sector, the steel industry has suffered from years of pains brought by overcapacity and disorderly competition. The introduction of the"anti-involution" policy has pointed out a new development direction for the sector.
Anti-Involution and the Current Status of the Steel Industry
At its core, anti-involution is a guidance approach for industries with excess capacity. Originating from national policy, it essentially sets a guidance baseline to prevent disorderly competition and damage to various segments of the overall economy. For specific industries, differentiated strategies should be adopted based on their own characteristics.
Judging by the performance of the steel industry in the first half of the year, positive changes have already emerged even before anti-involution policies have been fully implemented. According to operation data from the China Iron and Steel Association (CISA) and multiple listed steel enterprises for the first half of 2025, the steel industry has shown a favorable trend of recovering profits.
Although the recovery in steel industry profits was mainly driven by compressed profits of raw materials such as coking coal and coke, effective production control by steel enterprises also played an essential role. Amid persistently weak demand and heavy capacity pressure in the steel sector, supply-demand contradictions remain a concern. However, strong self-discipline in production restraint laid the foundation for improved profitability in the first half. Data from the National Bureau of Statistics show that China's crude steel output reached 515 million tons in the first half, down 3.0% year-on-year.
At the current stage, the steel industry does not have an urgent need for specific anti-involution policies. In contrast, industries such as coking coal face much higher urgency, which can be partly seen from recent policy adjustments and price fluctuations. Rising coking coal prices have squeezed some profits from the steel sector. According to current statistics, steel producers still maintain certain production profits overall. From the perspective of avoiding disorderly competition, it is reasonable for steel prices to move upward from their nearly eight-year historical lows.
Reflections on Anti-Involution in the Steel Industry
Taking the overall commodity market into consideration, anti-involution has, to some extent, changed the expectation that prices would remain suppressed by persistent supply-demand imbalances amid industry overcapacity. Value restoration has driven price increases, yet it does not alter the existing supply-demand tensions in overcapacity industries such as steel.
From this perspective, anti-involution is essentially a healthy model for industry competition: instead of disorderly competition based on price wars, it encourages orderly competition that pursues higher profit per ton of steel while maintaining a stable industrial environment.
It can also be regarded as a mild, step-by-step approach to addressing overcapacity, breaking the long-standing "involution" practices across various sectors in China.
