Reduced Chinese government incentives and new tax policies are dampening car demand in China, creating pressure on flat steel markets. Since passenger vehicle sales account for a large portion of steel consumption, the current slump raises alarms for manufacturers.

In addition, new rules limit maximum payouts for New Energy Vehicles (NEVs) based on purchase price, meaning buyers of mid-to-low-end electric models receive less support than last year.

High inventory levels for cold-rolled coils, which rose by 42% last year, further complicate the situation. While car demand fades, steel mills continue production to maintain slim profits, worsening the supply-demand imbalance.

With raw material costs staying firm but buyer interest weakening, the price gap between cold-rolled and hot-rolled coils is narrowing, leaving little room for price growth in early 2026.