China faces mounting challenges: the domestic economy is losing momentum, while steel and coal production is shrinking. According to Bloomberg, steel and coal output in July dropped sharply amid worsening weather conditions and government efforts to curb excess capacity.

Steel production fell 4% year-on-year to less than 80 million tons, the lowest level in 2025 and the third consecutive monthly decline. June’s contraction was milder than in May, as lower supply temporarily boosted profitability, but that was not enough to reverse the trend. Output for the first seven months of the year was down 3.1% versus 2024, marking the weakest result since 2020.

Coal output slid 3.8% in July to 380 million tons, the first major drop in a year, analysts noted. Still, cumulative production in the first seven months remained at record levels.

Industrial demand for commodities entered a seasonal lull, while extreme weather exacerbated the slowdown. Scorching heat and heavy rains forced mines, plants, and construction sites to suspend operations. Northern coal hubs were hit particularly hard, as flooding led to mine closures and transport disruptions.

Meanwhile, coal producers are under tighter government scrutiny for exceeding emission limits. The steel industry also faces significant overcapacity, which stood at 142 million tons in 2024—nearly four times higher than in 2020. Exports partly offset the weakness, but rising global protectionism threatens to curb sales.

Iron ore prices in China slipped 0.2% to $101.90 per ton after the release of weak July economic data. Crude steel production fell to 79.66 million tons, the lowest July reading since 2017.

According to experts, the slowdown was broad-based across China’s economy last month. The key drag remains the trade war with the US. Retail sales grew 3.7% year-on-year, the weakest pace in 2025, while fixed-asset investment rose only 1.6% in the first seven months amid a deepening property slump. Urban unemployment also came in higher than expected at 5.2%, analysts concluded.