Chinese steel output is expected to rise 3 per cent this year, before hovering at a similar level through 2018, according to the World Steel Association.
The updated 2017 forecast reflects a one-time rise in steel use in China this year, reflecting government incentives to bolster construction, while the flat outlook reflects the resumption of government efforts to rebalance the economy and increase environmental protection, the WSA said in its latest short-range outlook.
“China closed most of its outdated induction furnaces in 2017, a category which was generally not captured in official statistics,” the association said.
“With closure of the induction furnaces, the demand from this sector of the market is now satisfied by mainstream steel makers and therefore captured in the official statistics in 2017. Consequently, the nominal growth rate for steel demand in China increased to 12.4 per cent or 765.7 million tonnes.
Disregarding this statistical base effect [the association] expects that the underlying growth rate of China’s steel demand for 2017 will be 3 per cent, which will make the corresponding global growth rate 2.8 per cent,” it said.
The association forecasts global steel demand will reach 1622.1 million tonnes in 2017. In 2018, it is forecast that global steel demand will reach 1648.1 million tonnes.
Global steel demand excluding China will reach 856.4 million tonnes, an increase of 2.6 per cent in 2017 and 882.4 million tonnes, an increase of 3.0 per cent in 2018, the association also said.
“World steel demand is recovering well, driven largely by cyclical factors rather than structural,” said T.V. Narendran, chairman of the association’s economics committee.
“The lack of a strong growth engine to replace China and a long-term decline in steel intensity due to technological and environmental factors will continue to weigh on steel demand in the future.”
Mr Narendran said the risks to the global economy that were seen in the association’s April 2017 outlook — rising populism/protectionism, US policy shifts, EU election uncertainties and China deceleration — although remaining, “have to some extent abated”.
“This leads us to conclude that we now see the best balance of risks since the 2008 economic crisis,” Mr Narendran said. “However, escalating geopolitical tension in the Korean peninsula, China’s debt problem and rising protectionism in many locations continue to remain risk factors.”
The spot price of iron ore, a key steel-making material, rose 0.7 per cent to $US62.94 a tonne on Monday, according to Metal Bulletin. China imported a monthly record 102.83 million tonnes of iron ore last month, up 10.6 per cent from 92.99 million tonnes in September 2016.
Billet prices in China’s Tangshan region rose by a total of 70 yuan ($US10.60) per tonne over the weekend, resulting in the semi-finished product trading at 3620 yuan per tonne on the first trading day of this week, Metal Bulletin reported.
The city, as well as Handan in Hebei province and Anyang in Henan province, have all announced restrictions on steel production for six months beginning October 1. Restrictions are being strictly implemented, MB also reported.
Rio Tinto exported more Australian iron ore than expected in the September quarter, it said in its third quarter production update this morning. It initially forecast iron ore shipments from Western Australia would be between 330 million and 340 million tonnes in 2017; a weak start to the year forced the miner to downgrade that guidance to “around 330 million tonnes”.
Source: Australian Financial Review