Posted on 23 Dec 2020
2021, the first year of the 14th Five-Year Plan period (2021-2025), will mark the start of demand-side reform in China’s economy and global market, and China’s steel industry will also be driven by demand, with its growth outpacing that in supply to reach its peak in the next five years, Wang Jianhua, Mysteel’s chief analyst shared at the Mysteel Annual Summit in Shanghai on December 20.
The year 2020 is the end of the intensive supply-side reform in China’s economy and the steel sector in the 13th Five-Year Plan period (2015-2020), and in the new political and economic era starting 2021, “China will rely more on the domestic demand expansion for the national economic development, which will push ‘demand-side reform’ to the front stage,” Wang said.
Such an economic development model will request the country’s gross domestic product (GDP) to grow at 5-5.5% on year on average, and starting 2021, China will launch a series of adjustments in its economic growth along the “dual circulation” that Beijing proposed in 2020 for a sustainable and high-quality development, he added.
For 2021, China’s apparent steel consumption including domestic output and net steel import will grow 2% on year, and the actual consumption may grow even faster, with no specific volume mentioned, while the country’s total crude steel production, may grow but by just marginally to 1.08 billion tonnes in 2021 from the probable 1.05 billion tonnes for 2020 in volume, according to Wang.
China’s steel products supply, however, will be upgraded towards higher value-added products such as seamless pipes, special steel, and hot-rolled coil (HRC) to match the changes in demand, as China’s economic growth will not be about size, but about quality and structural optimization.
China, for example, will further increase the contribution of consumption to the national economy, and Wang, thus, expected the consumer goods retail revenue to grow 13% on year in 2021 against a projected 2.1% on-year decline for 2020, being supportive to the domestic steel consumption.
As for the manufacturing industry, the investment will rebound significantly by around 8% on year in 2021, with the signs of higher investment in the sector already emerging this year when the land lease for industrial use had been growing over 30% on year over June-August, according to Wang’s expectation.
Land lease is usually one-year ahead of the actual investment in the manufacturing sector, according to him, and this will trigger more demand for HRC and special steel.
As for auto manufacturers, also key steel consumers, their sales may increase by 7% in 2021 on the recovery in auto demand in general and in new energy vehicles (NEVs) in particular as well as higher exports led by Tesla, and in the longer term, the annual sales may reach 30 million units, Wang said.
China’s auto sales fell by 2.9% on year to 22.47 million units over January-November, but the sales in November alone grew by 12.9% on month to 2.77 million units with NEVs accounting for 200,000 units or skyrocketing by 104.9% on month, he cited the data from China Association of Automobile Manufactures.
Besides, China plans to increase self-sufficiency in oil and gas, according to its seven-year action plan over 2019-2025, which will lead to greater demand for seamless pipes starting 2021, if China wants to increase its crude oil output to 200 million tonnes/year by 2022, or translated to an average 1.5% on-year growth over 2020-2022 in the sector, Wang analysed.
As for the demand for construction and flat steel, it will persist from the infrastructure construction projects, even though China’s investment in the sector will not emphasize on the amount but on the necessity and effectiveness in enhancing urbanization, transportation, new infrastructure facilities, and water conservancy projects.
In 2021, China’s investment in the property market is anticipated to grow 5% on year to maintain a steady growth in the newly-commenced projects, which though being slower than the 6.3% on-year growth over January-October, may generate greater demand for steel from the pre-structured steel residential housing projects.
China’s shipbuilding industry, at the same time, may reverse to a positive on-year growth in 2021, even though the new ship orders, for example, still fell 6.6% on year over January-October, Wang said. The decline was much narrower than the 26% on-year drop in the corresponding period of 2019, Mysteel Global noted.
Externally, China’s active participation in global economy will also general new opportunities for the domestic steel mills in overseas cooperation and steel trade, Wang added, noting that among the world’s top 50 steelmaking countries in 2019, nine being RCEP members with a total production of 1.2 billion tonnes, or 64.7% of the world’s total.
Written by Sean Xie, xiepy@mysteel.com, Lindsey Liu, liulingxian@mysteel.com
Edited by Hongmei Li, li.hongmei@mysteel.com
Source:Mysteel Global
