Posted on 21 Jun 2021
China will see its demand in terms of crude steel grow further within the current Five-Year Plan period ending 2025, underpinned by the national economic development, Meng Wei, spokesperson of China’s National Development and Reform Commission (NDRC) stated at a press conference on June 17.
Meng made the statement in reply to the media inquiry on China’s persistently high crude steel output despite the country’s efforts to scale back the steel capacity.
Last year, the country’s crude steel output grew by 7% on year to reach an all-time high of 1.065 billion tonnes, even though over 150 million tonnes/year of iron and steel capacity and some 140 million t/y of ‘substandard’ steel capacity had been eliminated during 2016-2020, as Mysteel Global reported.
“Due to factors such as robust domestic demand, our country’s crude steel output has kept increasing at a fast rate,” Meng explained.
“It is forecast that at a certain point of time in the future, especially before the end of the 14th Five-Year Plan period, demand for crude steel will still have room for growth amidst new progress and achievements in the country’s economic development,” she said.
Meng, however, reiterated that China will hold the “zero tolerance” view on illegitimate steel capacity expansion, continuing with the efforts in promoting green and low-carbon steelmaking, accelerating mergers and acquisitions among the Chinese steel mills, optimizing the location of steel capacities, and encouraging the installation of electric arc furnaces as well as expanding domestic iron ore production over 2021-2025.
Meng’s remarks about strengthening steel demand in the near future, re-ignited the chatter in Chinese steel industry circles on Thursday as this pose a question mark on whether Beijing will stick to its original plan to curb steel output on year this year or whether the goal has been quietly abandoned.
In late January as reported, China’s Ministry of Industry and Information Technology called for a reduction in crude steel output this year from the 2020 level and has repeated its determination to see this happen on several occasions since. But many market insiders are privately saying such a reduction will be rather difficult to achieve.
After all, over January-May, China’s crude steel production surged by 13.9% on year to 473.1 million tonnes, National Bureau of Statistics data show, though admittedly, the 6.6% on-year growth in May was slower than 13.4% on-year jump in April.
“This (goal of trimming steel output) now seems to have a lot of uncertainties attached,” a steel futures analyst based in Shanghai commented following the press conference. “However, we’d better stay calm and not overact to one or two single statements (from the government),” he suggested.
A Beijing-based steel analyst also threw the same doubt, reasoning that NDRC is the top economic planning body in China, and now that Meng explicitly anticipated the continuing growth in steel demand, it might suggest that the MIIT’s original commitment has been overwritten.
“Personally, I feel steel output may decline on month for the rest of this year, but on-year, the annual output will probably still grow to about 1.1 billion tonnes,” he said.
On Thursday afternoon following Meng’s remarks, the most-traded rebar contract on the Shanghai Futures Exchange for October delivery ended the daytime trading session 0.3% higher from Wednesday’s settlement price at Yuan 5,101/tonne ($793/t) including the 13% VAT.
Also on Thursday, the most-traded futures contracts for iron ore and coke on the Dalian Commodity Exchange for September delivery also moved up by 1% and 1.6% on the same comparison to Yuan 1,223.5/dmt and Yuan 2,753/t respectively.
Source:Mysteel Global
