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CONF: Growth in China’s steel output, demand to ebb in H2

The growth in China’s steel demand is expected to slow down during the second half of 2019 and so will the country’s steel output in turn, Qu Xiuli, vice chairman of the China Iron and Steel Association shared the prediction at the 2019 4th China Steel Derivatives International Conference in Shanghai on July 5.

Both the macro-economic environment and the key steel-consuming sectors in China are unlikely to support continuing strong growth in the countrys domestic steel consumption, she told delegates.

Beijing is unlikely to maintain high growth in the countrys fixed asset investment to support stable economic growth either, as it needs to be aware of systematic financial risks too, so steel consumption from the sectors such as property may ease.

Chinas domestic steel demand has already shown signs of softening, especially from the sectors such as automobile manufacturing and shipbuilding that consume mainly flat steel, she added.

Over January-May this year, Chinas auto production and sales declined by a large 13% on year as against 2018s 4.2% and 2.8% year-on-year declines respectively, according to official statistics.

At the same time, Chinas 2019 steel exports are unlikely to surge or slump but will most probably be rangebound, despite that the countrys steel exports over January-May shrugged off the steady decline since 2016 to record 2.5% year-on-year growth to 29 million tonnes, Qu commented.

Chinas steel industry is facing growing uncertainties in steel exports amid a slow-down in global economic growth and the Sino-US trade friction, Qu commented. The trade friction is having more indirect than direct impact on Chinas steel exports in the aspects that European Union and ASEAN countries may refrain from importing steel from China,she elaborated.

Overseas orders for China-produced machinery may decline too, thus affecting the domestic demand for steel from the manufacturing sector. Mass manufacturing production lines are (also) moving out of China, which will affect steel consumption in the sector,she added.

Ren Zhuqian, assistant president of Shanghai Ganglian, agreed on a less robust performance in Chinas macro-economic environment in the second half of 2019, with the property market, for example, likely to see fixed asset investment grow at a slower pace than in H1, indicating that the double-digit growth so far in the aspect may not last through the second half of this year.

Chinas fixed asset investment in the property market grew 11.2% on year, faster than the 9.5% year-on-year growth for 2018, she quoted the official statistics.

The stepped-up efforts of the central government to control pollution, together with slower growth in the major steel-consuming sectors and the wider economy generally, are likely to see Chinas steel output ease back from the 10% year-on-year growth in the first five months, Ren told conference delegates.

Chinas daily crude steel output has shown signs of easing since the start of June, Qu noted, as daily output over June 1-10 declined by 0.78% compared with the previous ten days to 2.851 million tonnes/day, she noted. Daily output trended upward since the start of 2019 to hit a new record of 2.875 million t/d in May, Qu observed.

Qu did not share any projection on Chinas steel output for 2019. Ren predicted the countrys total steel output, under the circumstances, would grow 3.6% on year or by 34 million tonnes, with the contribution to the rise during this half being 12 million tonnes.

Written by Nancy Zheng, zhengmm@Mysteel.com, and Hongmei Li, li.hongmei@mysteel.com

Edited by Russ McCulloch, russ.mcculloch@mysteel.com