According to Mr Li Xinchung, Vice Executive Secretary General of the China Iron and Steel Association (CISA), the steel industry in China is expected to benefit from the buoyant growth in the country’s major steel consuming sectors. He projected that steel consumption in the country will be 690 million tonnes in 2013 and will expand to 716 million tonnes in 2014.
Construction sector, the major steel consuming sector in China, will continue to grow rapidly as a result of the accelerated urbanization and industrialization activities in the country. Mr. Li predicted that there will be a total of 390 million tonnes of steel used in the construction sector in 2014, an increase of 2.4% y-o-y.
In 2014, China’s automobile production will continue to increase significantly, at 11% y-o-y, although the rate is lower when compared to the growth rate in 2013. The annual production of cars will be 24.2 million units in 2014. Total steel demand for automobile will be 46.5 million tonnes in 2013 and 50.7 million tonnes in 2014.
Demand for machinery will recover in 2014 as a result of increased investment on urbanization, infrastructure construction and railway transportation. Steel demand for the machinery sector is estimated at 133 million tonnes in 2013 and at 140 million tonnes in 2014.
Steel demand for shipbuilding will increase by 3.7% from 13.5 million tonnes in 2013 to 14 million tonnes in 2014. The household appliances production will expand significantly by 10% y-o-y in 2014, resulting in a total of 10.5 million tonnes of steel used in the sector during the same period.
On the supply side, China’s steel industry is currently facing a serious overcapacity problem. Many steel companies have reduced their production capacity by closing down some obsolete facilities. Hebei province, as an example, has set a target to permanently close obsolete production capacity of some 110 companies in 15 industrial sectors in the province in 2013. However the actual capacity closure involved 190 companies in 20 industrial sectors. In particular, a total of 1.3 million tonnes per year of ironmaking capacities, 1.1 million tonne per year of steelmaking capacities, 3.6 million per year of ferroalloy capacities have been closed by the end of October 2013.
Nevertheless, new steel production capacity continued to expand significantly. New steel-making capacity increased robustly in 2012 (nearly doubled in volume when compared to 2011). The planned fixed assets investment for the steel industry from January to September 2013 is 1.4 trillion yuan, an increase of 6.03% y-o-y. The projects include ferrous ore mining and beneficiation, iron making, steel making and steel processing.
Steel production in China continued to expand at around 4.7% growth rate in 2012, a significant decline when compared to the growth rate of 16-17% during the period 2001-2011. According to World Steel Association, China’s crude steel production from January to October 2013 rose by 8.3% y-o-y to 652.48 million tonnes.
According to Mr. Li, capacity utilization rate of iron –making and steel-making declined significantly, from above 80% in 2011 to above 70% in 2012.
Mr. Li also predicted that crude steel production will rise by 4.12% to 808 million tonnes in 2014. As a result, it is estimated that net steel export from China will be 54 million tonnes, or an increase of 9.3% y-o-y in 2014.