Chinese steel production to slow sharply in 2018

Posted on 09 January 2018

Source: Financial Times

China’s steel production growth is expected to slow sharply in 2018 as state-mandated factory closures and policies to protect the environment begin to bite.

The world’s largest producer of the metal will experience just a small rise in output of 0.6 per cent this year, a poll of 15 analysts found in a Financial Times survey.

Steel is often viewed as a barometer of economic activity because it is used in carmaking, construction and manufacturing, which means a significant price move could have repercussions for the broader economy.

For the steelmakers, the Chinese slowdown could have positive effects.

A modest increase in production from China, which accounts for about half the 1.7bn tonnes churned out worldwide, could restore balance to a global market that was ravaged by a collapse in prices two years ago due to oversupply.

The anticipated slowdown comes despite a robust outlook for the Chinese economy and contrasts with a 5.7 per cent jump in its crude steel output during the first 11 months of 2017, according to World Steel Association figures.

Even so, global annual production in 2018 is slated to increase 2.1 per cent, according to an average of the analysts’ forecasts.

World output increased 5.4 per cent between January and November 2017, compared with the same period a year before.

Rod Beddows of HCF International Advisors said: “The total market appears to be reverting to a more stable ‘normal’ with Chinese exports under control.”

Donald Trump’s pledge to renew US infrastructure, coupled with the impact of import restrictions against steel deemed unfairly traded, were cited as factors behind the average forecast of a 3.4 per cent jump in the country’s steel production in 2018.

Alistair Ramsay of the publication Metal Bulletin said that US producers had been winning customers back from external suppliers, partly due to a weak dollar.

“We suspect this pattern will continue in 2018 enabling local mills to benefit further from the recent revival in local steel usage following a two-year depression,” he said.

Steelmakers in the EU are expected to produce 2.4 per cent more as the economic recovery in many countries across the bloc gains strength. Brussels has similarly slapped tariffs on material deemed to be unfairly traded.

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