Steel War 2026: KADI’s Investigation into China’s WISCO Takes Center Stage

Dedi Supriadi, S.H.,M.M (International Trade Lawyer)

The global steel landscape in 2026 has been defined by a fundamental structural shift, as the world’s largest producer, China, grapples with domestic “involution” while international markets erect increasingly sophisticated trade barriers. At the heart of this geopolitical and economic friction is the Indonesian Anti-Dumping Committee’s (KADI) investigation into Hot Rolled Coil (HRC) imports from Wuhan Iron and Steel Co., Ltd. (WISCO), a primary subsidiary of the China Baowu Steel Group. This investigation, which reached a critical preliminary phase in January 2026, serves as a focal point for understanding the broader “Steel War” characterized by overcapacity, aggressive trade remedies, and the global transition toward decarbonized manufacturing. The confluence of declining Chinese domestic demand, the reintroduction of Chinese export licenses, and a wave of protectionism across the Association of Southeast Asian Nations (ASEAN) has created a volatile environment where industrial policy and international trade law are inextricably linked.

The Macroeconomic Catalyst: China’s Internal Imbalance

To understand why the KADI investigation into WISCO has taken center stage, one must first analyze the macroeconomic stressors within the Chinese domestic market. For the 2026 fiscal year, S&P Global and other major analytical bodies have forecast a continued contraction in Chinese steel demand, projecting a drop to 837 million metric tons (mt) from an estimated 860 million mt in 2025. This decline is primarily attributed to the prolonged “bottoming-out phase” of the Chinese property sector, which has historically been the primary engine for steel consumption. While infrastructure projects and the manufacturing sector provide some measure of support, they are insufficient to offset the deep adjustments occurring in real estate.

China’s response to this domestic slowdown has been twofold: an internal push for “anti-involution” and an external surge in exports. The term “involution” has become central to the 2026 Five-Year Plan, referring to the destructive, low-margin competition that results when supply vastly exceeds demand. The National Development and Reform Commission (NDRC) has emphasized that the raw materials industry must undergo reforms based on the “survival of the fittest” principle to correct the supply-demand imbalance. Consequently, China’s crude steel production is expected to decline modestly to 970 million mt in 2026, down approximately 1% from 979 million mt in 2025.

Table 1: Forecasted Steel Demand and Production in China (2025–2026)

Metric	2025 Estimate (Million mt)	2026 Forecast (Million mt)	Percentage Change
Crude Steel Production	979	970	-0.92%
Apparent Steel Consumption	860	837	-2.67%
Property Sector Steel Use	400	384	-4.10%
Machinery Industry Steel Use	180	181	+0.56%
Automotive Industry Steel Use	63.9	66.7	+4.38%

Data synthesized from S&P Global, Mysteel, and MPI reports.

This environment of domestic contraction has forced giants like Baowu and its subsidiary WISCO to look abroad. However, the international community’s receptivity to Chinese steel has reached a historical nadir. The negative credit rating outlooks for Baowu and its flagship subsidiary Baoshan Iron and Steel Co., Ltd. (Baosteel) reflect the belief that poor industry conditions will hamper deleveraging and financial recovery for these state-linked entities.

The KADI Investigation: Chronology and Mechanism

The investigation into WISCO HRC imports was officially initiated on September 1, 2025, following a concerted effort by the Indonesian domestic steel industry to secure protection from what they described as predatory pricing. The applicant, PT Krakatau POSCO, acting on behalf of the national industry, provided evidence that HRC products from WISCO were being sold in Indonesia at prices significantly below their normal value, thereby causing material injury to domestic producers.

A unique aspect of this case is that WISCO had previously enjoyed an exempt status. Following the conclusion of a third sunset review in December 2024, most Chinese producers were subjected to a 20% anti-dumping duty on HRC. WISCO was the only major steelmaker omitted from these duties at that time. This exemption essentially made WISCO the primary gateway for Chinese HRC into the Indonesian market, leading to a massive spike in volume that local producers found impossible to compete with.

On January 20, 2026, KADI released its preliminary findings. The committee concluded that dumped imports from WISCO had indeed caused tangible material injury to the Indonesian domestic industry and that a clear causal relationship existed between these imports and the deteriorating financial condition of local mills. Consequently, KADI proposed a provisional anti-dumping duty of 17.55% ad valorem, which translates to a specific duty of $95.02 per metric ton.

Table 2: Details of KADI Preliminary Anti-Dumping Duties on WISCO

Component	Specification	Source
Product	Hot Rolled Coil (HRC) / Non-alloy steel
Exporter	Wuhan Iron and Steel Co., Ltd. (WISCO)
Proposed Ad Valorem Duty	17.55%
Proposed Specific Duty	$95.02 per metric ton
Provisional Duration	4 to 9 months (depending on final duty level)
Lead Petitioner	PT Krakatau Steel (Persero) Tbk

The proposed duties cover a wide range of Indonesian HS codes, including 7208.10.00, 7208.25.00, 7208.39.40, and others.

The investigation covers eighteen specific Indonesian HS codes, representing the bulk of HRC consumption in the country’s manufacturing and construction sectors. The implementation of these provisional measures is intended to provide immediate relief to domestic producers while the final assessment is conducted, a process that typically spans 12 to 18 months.

The Domestic Industry Imperative: IISIA and the Struggle for Survival

The push for trade remedies in Indonesia has been spearheaded by the Indonesia Iron & Steel Industry Association (IISIA). The organization has issued increasingly dire warnings about the potential collapse of the national steel sector if aggressive measures are not taken. According to IISIA Executive Director Widodo Setiadharmaji, the influx of cheap Chinese steel has pushed domestic production capacity utilization to sub-optimal levels, often falling far below the 80% threshold required for efficient and profitable operation.

The scale of the “invasion,” as described by IISIA, is supported by trade data. Chinese steel imports to Indonesia rose by 43.71% in 2023 and continued to surge in the first half of 2024, reaching nearly 3 million tons—a 34% year-on-year increase. This trend has made it impossible for national producers to compete, leading to significant losses in market share and, in some cases, the complete cessation of sales for specific product lines.

IISIA has argued that Indonesia is particularly vulnerable because other global markets have already closed their doors to Chinese overcapacity. For instance:

The United States maintains 25% tariffs under Section 301 and Section 232.
Mexico applies duties between 5% and 25% for countries without free trade agreements.
Brazil recently increased import taxes to 25% for several steel types.
The European Union utilizes a 25% tariff rate quota alongside the Carbon Border Adjustment Mechanism (CBAM).

As these traditional markets restrict access, Chinese exporters have shifted their sales focus toward Southeast Asia, particularly Indonesia, which until recently had a more permissive trade environment. The IISIA has called for the government to implement not only anti-dumping duties but also more rigorous enforcement of Indonesian National Standards (SNI) and the implementation of a “commodity balance” system to ensure that imports only enter when domestic supply is truly insufficient.

China’s Strategic Pivot: Export Licensing and High-Quality Development

Recognizing the mounting international friction, the Chinese government implemented a major policy shift on January 1, 2026: the reintroduction of an export licensing system for steel products. Formulated by the Ministry of Commerce (MOFCOM) and the General Administration of Customs (GAC), Announcement No. 79/2025 requires foreign trade operators to obtain prior permission for the shipment of approximately 300 specific steel products.

The stated objectives of this policy are to enhance monitoring, track product quality, and promote the high-quality development of the domestic industry. However, from a geopolitical perspective, the move is seen as an attempt to mitigate global trade tensions by regulating the flow of low-value, high-energy-consuming steel that frequently triggers anti-dumping investigations. To obtain a license, enterprises must submit an export contract and a product quality inspection certificate issued by the manufacturer, a requirement designed to eliminate non-compliant “under-the-name” exporters.

Table 3: Objectives and Mechanism of China’s 2026 Export License Policy

Objective	Mechanism	Implications for Global Trade
Mitigate Friction	Monitoring of 300 customs codes	Aims to reduce the number of AD/CVD cases (over 50 in 2024).
Optimize Structure	Prioritizing low-carbon, high-value steel	Shifts competition from price to quality/environmental standards.
Regulate Competition	Mandatory quality certificates	Elimination of low-cost, low-quality “illegal” exporters.
Green Transition	Alignment with global standards	Preparing for EU CBAM and other carbon-linked barriers.

The policy exempts terminal consumer goods like fasteners and automotive parts, signaling a shift toward indirect steel exports.

This licensing regime marks the first time in 16 years that China has exercised such direct control over its steel exports. While it is intended to stabilize trade relationships, many international observers remain skeptical. The Japan Iron and Steel Federation, for instance, has noted that the new permits are likely focused on quality control rather than volume restriction and may not significantly support global price recovery or limit the sheer scale of Chinese exports.

Regional Contagion: Protectionism Across ASEAN

The investigation into WISCO by KADI is part of a broader “protectionist wave” sweeping through Southeast Asia. As of early 2026, almost every major ASEAN economy has intensified its trade defense actions against Chinese steel.

Vietnam’s Regulatory Offense

Vietnam has been particularly aggressive. On January 2, 2026, the Ministry of Industry and Trade (MoIT) issued Decision 3765/QĐ-BCT, extending anti-dumping measures on certain cold-rolled steel products from China for another five years, until 2030. Furthermore, Vietnam has initiated anti-circumvention probes into wide steel coils from China, with results expected in early 2026. Despite these barriers, Vietnam remains China’s top export destination due to rigid demand from massive infrastructure projects, such as special economic zones and canal construction.

Thailand’s Sunset Reviews

Thailand has followed a similar path, announcing in late January 2026 the final results of its second sunset review for cold-rolled steel. The government decided to maintain existing duty rates for another five years. Chinese exporters face rates ranging from 9.24% for Baoshan Iron & Steel to 20.11% for other suppliers. These duties apply to both coiled and uncoiled sheets with widths exceeding 1,550 mm.

Malaysia and the Philippines

Malaysia has also joined the fray, imposing provisional anti-dumping duties ranging from 3.86% to 57.90% on galvanized iron and steel coils from China, South Korea, and Vietnam as of July 2025. This trend suggests that the ASEAN “Red Ocean”—traditionally a major market for Chinese steel—is rapidly closing, forcing Chinese producers to seek alternative markets in regions like Saudi Arabia and the Middle East where infrastructure demand remains high and trade barriers are lower.

Table 4: Regional Trade Remedies Against Chinese Steel (2025–2026)

Country	Targeted Product	Action Taken	Duty Rate / Range	Date
Vietnam	Cold-Rolled Steel	5-Year Extension	(Specified by case)	Jan 2026
Thailand	Cold-Rolled Carbon Steel	5-Year Extension	9.24% – 20.11%	Jan 2026
Malaysia	Galvanized Coils	Provisional Duties	3.86% – 57.90%	July 2025
South Korea	Stainless Plate/Coil	5-Year Extension	23.69% – 25.82%	May 2025
Indonesia	HRC (WISCO)	Preliminary Duty	17.55%	Jan 2026

The Carbon Frontier: Decarbonization as a Trade Barrier

The “Steel War” of 2026 is not merely about price; it is increasingly about the carbon footprint of production. China’s steel industry was formally incorporated into the national carbon emission trading scheme (ETS) in March 2025, a move that has introduced carbon costs into the domestic production equation. This internal pricing mechanism is mirrored by the European Union’s implementation of the Carbon Border Adjustment Mechanism (CBAM), which becomes fully effective in 2026.

For traditional blast-furnace producers like those within the Baowu group, these regulations represent a significant financial challenge. European steel producers are already pushing for 25% to 50% tariffs on Chinese steel to level the playing field against imports that do not face similar carbon costs. In response, Chinese firms are investing heavily in green technology. Baowu recently commissioned a one-million-ton hydrogen-based steel production line at its Zhanjiang site, claiming it can reduce carbon emissions by 50% to 80% compared to conventional methods.

The intersection of trade remedies and environmental policy has created a new paradigm: “Green Protectionism.” Indonesian producers have also recognized this shift. PT Krakatau Steel has announced plans to invest in zero-carbon HRC technology specifically to maintain its ability to export to the European market under CBAM. This competition for green manufacturing will likely dictate the winners and losers of the next decade in the global steel market.

The US Dimension: Re-exportation and Broadening Trade Friction

The US-China trade dynamic continues to cast a long shadow over Southeast Asia. In early 2026, US tariff policy toward the region remains a critical flashpoint. “Reciprocal” tariff rates for major ASEAN partners like Indonesia and Vietnam are currently set between 19% and 20%. However, the effective rates vary significantly due to pending Section 232 investigations and exemptions.

A primary concern for US trade officials is “re-exportation”—the practice of shipping Chinese-origin steel through intermediate markets like Thailand or Vietnam to circumvent US duties. Between 2020 and 2025, imports from China into Indonesia, Thailand, and Vietnam rose by 30% to 38%. During the same period, these countries saw a sharp increase in exports to the US, leading the US to threaten steep tariffs on Chinese goods re-exported from these regions.

Furthermore, the friction is not limited to steel. In January 2026, the US International Trade Commission (ITC) instituted anti-dumping and countervailing duty investigations into certain fatty acids from Indonesia and Malaysia. The petitioner, Vantage Specialty Chemicals, has alleged dumping margins for Indonesia as high as 72.03%. This demonstrates a broader environment of trade fatigue, where Indonesian exports across multiple sectors are facing intense scrutiny from the North American market.

Table 5: US Effective Tariff Rates on Major ASEAN Partners (Sept 2025)

Partner Country	Effective Tariff Rate	Duty-Free Import Share	Exposure to Pending Probes
Indonesia	19.7%	11%	84%
Vietnam	12.7%	–	84%
Thailand	10.1%	–	94%
Malaysia	8.7%	–	72%
Singapore	2.6%	75%	71%

Data reflects the precarious position of ASEAN exporters in the US market.

Contrast in Outcomes: The Turkey Stainless Steel Success

Amidst the prevailing gloom of trade investigations, the Indonesian steel industry achieved a notable milestone in early 2026 regarding its stainless steel exports to Turkey. After an 18-month investigation into cold-rolled stainless steel (CRSS) from Indonesia and China, Turkish authorities decided to terminate the case against Indonesia without imposing penalties.

The Turkish Anti-Dumping and Subsidies Bureau concluded that Indonesian CRSS imports were at a de minimis level of dumping and caused no material harm to the Turkish domestic industry. This outcome was a significant victory for the Indonesian Ministry of Trade and national manufacturers, who cooperated extensively with the investigation. The success highlights a critical insight: when domestic industries can demonstrate fair trade practices through transparent data and compliance, they can successfully navigate the global “Steel War.” Indonesian CRSS exports to Turkey grew from $21.9 million in 2020 to $108.6 million in 2024, and this clearance is expected to further bolster the sector’s global presence.

Impact on Downstream Sectors: Automotive and Construction

The provisional 17.55% duty on WISCO HRC will have immediate and far-reaching consequences for Indonesia’s downstream industries. HRC is a foundational material for both the construction and automotive sectors.

The Construction Conundrum

In the construction sector, steel demand is expected to remain relatively resilient due to domestic infrastructure projects. However, the increased cost of imported HRC—whether from the duty itself or from shifting to more expensive domestic sources—could inflate project budgets. For Indonesia’s property market, which is already in a “bottoming-out” phase, these cost increases could delay recovery.

The Automotive Shift

The automotive industry faces a different set of challenges. While China’s domestic sales growth is slowing due to the phase-out of NEV tax incentives, Chinese automakers are aggressively expanding into emerging economies. This results in a surge of “indirect” steel exports—completed vehicles—which are not subject to the same HRC anti-dumping duties. Mysteel projects that China’s indirect steel exports will grow by 15% in 2026, driven largely by the automotive sector. This shift suggests that the “Steel War” is simply moving downstream, as Chinese manufacturers embed their overcapacity into higher-value products.

Market Outlook: Price Projections and Strategic Realignment

Despite the widespread trade friction, industry analysts project a slight recovery in steel prices for the 2026 fiscal year. Mysteel forecasts that the average price of HRB400E 20mm rebar in Shanghai will rise by 1.5% to 3,300 Yuan per ton, while HRC prices will see a similar 1.5% increase to 3,380 Yuan per ton. These increases are driven not by demand, but by “anti-involution” supply controls and the higher costs associated with carbon compliance.

For WISCO and its parent company Baowu, the 2026 outlook remains challenging. The combination of negative rating outlooks, tightening export licenses, and the proliferation of ASEAN duties creates a “pincer effect” that limits profitability and deleveraging potential. The industry is witnessing a “survival of the fittest” scenario where only the most efficient and environmentally compliant producers will thrive.

Conclusion

The KADI investigation into China’s WISCO has become a central case study for the global steel industry in 2026. It encapsulates the transition from an era of unbridled globalization to one of regionalized protectionism and carbon-linked trade barriers. For Indonesia, the investigation represents a necessary defense of its national industrial capacity against the overflow of Chinese domestic oversupply. For China, the case highlights the limitations of its traditional export-led growth model and the urgent need for “anti-involution” reforms.

As 2026 progresses, the “Steel War” is likely to intensify. The proliferation of anti-dumping duties across ASEAN, the reintroduction of Chinese export licenses, and the full implementation of CBAM in Europe collectively signal the end of cheap, unregulated steel. The future of the industry will be defined by “Green Steel” initiatives and high-value-added manufacturing, as producers worldwide are forced to compete on quality and environmental footprint rather than just price. The resolution of the WISCO case will not only determine the fate of HRC trade in Southeast Asia but will also set the tone for trade relations between the Global South and the world’s largest steel producer for years to come.

Sources used in the report: