Electrical steel has become a crucial product in China's steel industry, driven by the global decarbonization drive. The country's exports of electrical steel have been growing rapidly in recent years, with significant increases in both volume and value.

In 2021, China shipped 860.96 thousand tons of electrical steel, a 64% year-on-year increase. This growth continued in 2022, with a 49% year-on-year increase to 1.28 million tons, and in 2023, the figure fell by 4% to 1.23 million tons.

The demand for electrical steel is primarily driven by the expansion of the electric vehicle industry outside of China. As a result, overseas supplies have become an opportunity for more Chinese steel mills to sell their growing volumes of electrical steel. In the first quarter of 2024, China's exports of electrical steel reached 356.73 thousand tons, a 30% year-on-year increase.

The top five buyers of Chinese electrical steel in the first quarter of 2024 were India, Turkey, Mexico, Italy, and the United States, accounting for a total share of 57% of shipments. India was the largest buyer, accounting for 15% of China's total electrical steel exports.

China's electrical steel production capacity has also been increasing. According to the China Society of Metals, the country produced 15.28 million tons of electrical steel in 2023, a 15% year-on-year increase. Some steel mills are still expanding their production capacity in anticipation of increased demand. For example, a 1 million tons per year electrical steel project was launched in Inner Mongolia in September 2023, with its first phase (500 thousand tons per year) scheduled to begin production in May 2024.

Industry analysts expect China's annual electrical steel production capacity to reach 18-20 million tons by 2026, up from 16.67 million tons in 2023. The good margins amid strong demand at home and abroad have prompted Chinese mills, including leading steel mills, to increase their electrical steel production capacity. This is exemplified by large investments in non-oriented electrical steel, including Baowu Group, the world's largest steel producer, and Shougang Group.

The growth of the electrical steel market is also driven by the increasing adoption of electrical steel in electric vehicles and hybrid cars, fueled by the growing focus on sustainable transportation solutions and stricter emission regulations.