Chinese steel mill profitability has recovered to its highest level since August, with 64% of mills now profitable according to Mysteel's survey of 247 plants. That marks only the second time profit rates have exceeded October 2024 levels, offering a rare bright spot in a sector plagued by oversupply and weak demand.

The rebound stems from constrained supply due to environmental restrictions and mill maintenance, solid downstream consumption, and strengthening exports since April as overseas producers pushed up prices. But analysts caution the improvement rests on a domestic-versus-international price gap rather than genuine demand strength, per Mysteel researcher Steven Yu.

HSBC analysts expect weak demand to keep margins suppressed through most of 2026, with policy-led supply discipline potentially stabilizing conditions by late 2026. Iron ore futures slipped 0.9% to $109.60 a ton in Singapore, while Baltic Dry freight rates climbed to their highest since December 2023.