After more than 70 years of development, China has grown from a technological follower to a global leader, overcoming supply bottlenecks and supporting both its industrial and defense sectors. However, with rapid production capacity expansion in recent years, competition in China's silicon steel market has intensified, and structural imbalances are becoming more apparent.
Integrated growth and competitiveness of China's silicon steel
By the end of 2024, China's cold-rolled silicon steel capacity reached approximately 18 million tonnes, including 15 million tonnes of non-oriented (NGO) electrical steel and 3 million tonnes of grain-oriented (GO) electrical steel.
More than half of this capacity was added after 2010, with leading steel companies such as Baosteel and Shougang operating advanced production lines dedicated to manufacturing high-grade NGO for use in new energy vehicles (NEVs).
Between 2016 and 2024, China's total silicon steel output increased from 8.65 million tonnes to 16.1 million tonnes, representing an average annual growth rate of 8.1%. During this period, the share of high-grade products grew significantly: GO's proportion rose from 13% to 18.3%, while NGO increased from 18.9% to 31.2%.
On the export front, China became a net exporter of silicon steel in 2017. By 2024, total silicon steel exports reached 1.45 million tonnes, with net exports amounting to nearly 1.3 million tonnes. Significantly, exports to developed markets, including the United States, European Union, South Korea and Japan, have tripled since 2016.
The industry's competitiveness also benefits from an increasingly integrated value chain. Major steelmakers such as Baowu, Angang and Shougang have established full-process production capabilities for both GO and NGO. Additionally, key downstream users are moving upstream by investing in their own silicon steel production.
China has achieved technological leadership in key areas such as low-temperature high-magnetic induction GO, thin-strip casting, and advanced rolling processes for high-grade NGO. Furthermore, many Chinese companies have developed world-class cold-rolled silicon steel production equipment, which is now being exported to Europe.
Steady demand growth in key downstream sectors
Since 2016, China's apparent consumption of silicon steel has increased from 8.7 million tonnes to 14.8 million tonnes by 2024, representing an average annual growth rate of 6.9%. Among this, NGO consumption rose from 7.66 million tonnes to 12.42 million tonnes, GO grew from 1.04 million tonnes to 2.38 million tonnes.
China's demand for silicon steel, high-grade in particular, is expected to continue growing in the coming years, driven by several key sectors.
In power generation, the expansion of renewable energy sources such as wind and solar power is increasing the need for high-grade NGO. This demand is projected to rise by approximately 100,000 tonnes per year.
In the transmission and distribution sector, the implementation of new transformer efficiency standards will further boost demand for high-magnetic induction GO, adding an estimated 200,000 to 300,000 tonnes annually.
China's rapid development of NEVs, with domestic market penetration expected to reach 45% by 2025, is leading to greater demand for thinner, high-grade NGO, with an anticipated increase of 200,000 tonnes per year.
Similarly, ongoing efficiency upgrades in the motor industry will result in additional demand for high-grade silicon steel, while gradually phasing out low-grade alternatives. This is expected to drive an annual increase of 200,000 to 300,000 tonnes in demand for high-magnetic induction, high-grade silicon steel.
In the home appliance sector, stricter energy efficiency regulations are set to drive up demand for high-grade NGO used in compressors, with an estimated increase exceeding 100,000 tonnes per year.
Despite the steady growth in silicon steel demand, the ongoing and planned expansion of supply far exceeds projected consumption increases. Between 2024 and 2026, China is expected to add 9.8 million tonnes of NGO capacity and 1.7 million tonnes of GO capacity.
By 2026, total NGO capacity will reach 24.8 million tonnes, representing a 65% increase compared to 2023, while GO capacity will reach 4.2 million tonnes. This sharp increase in production capacity will pose significant risks of oversupply, as supply growth is set to outpace demand by a wide margin.
Overcapacity intensifies competition, drives industry upgrades
While high-grade silicon steel demand is expected to continue growing in the next few years, driven by renewable energy, NEVs, and stricter energy efficiency standards, China's overall silicon steel sector faces mounting risks of overcapacity and intensified competition, particularly in high-end NGO and GO segments.
To avoid inefficient capacity additions, Chinese silicon steel producers must conduct thorough, data-driven investment evaluations. Meanwhile, demand for premium, high-performance silicon steel will accelerate product upgrades, requiring stronger R&D efforts and closer collaboration with downstream users.
To remain competitive, Chinese silicon steel producers must focus on innovation, optimize product structures, and enhance their role in supporting downstream industry upgrades, as China's silicon steel market shifts from quantity expansion to quality-driven development.