MYSTEEL: China construction steel output to fall 1% in '23

During 2023, crude steel production will continue to be impacted by the central government's determination to ensure that steel output remains flat or below the previous year's total, Mysteel learned. Long products output will inevitably be impacted, though it will be more common for mills to rein in construction steel output by themselves in response to changes in market conditions, it said.

Within the production total, rebar output is expected to slide 1.1% or by 3 million tonnes on year to 263 million tonnes for 2023, and that of rods will likely drop 0.7% or 1 million tonnes to 143 million tonnes over the same period, compared with the on-year declines in 2022 of 7.3% and 7.9% respectively, Mysteel predicts.

In the first quarter of this year, enthusiasm among Chinese steelmakers for increasing construction steel output is unlikely to show any signs of recovery, due to the mills' persistent margin losses on construction steel sales and because of seasonal factors, according to the forecast.

Production of the two construction steel items will gradually rise from Q2 as mills may ramp up production with the release of demand from end-users and with profit margins improving.

However, the space of construction steel output growth will be limited as steel producers may switch from producing long steel items to other finished steel products after the country's crude steel output reaches its peak for this year, the report suggested.

On the other hand, China's apparent consumption of construction steel during 2023 may dip by 0.7% or 3 million tonnes on year to 405 million tonnes, Mysteel forecasts, among which, steel consumed by the country's property sector will rebound modestly in the second half of the year after staying flat in the first half.

Meanwhile, the domestic infrastructure sector will see an on-year uptick in steel consumption in 2023, as the sector's tight cash flow situation may ease and work on infrastructure projects not completed as scheduled over 2021-2022 is restarted, Mysteel noted.

The report also predicts that domestic spot rebar prices will fluctuate widely throughout the year in the range of Yuan 3,900-4,600/tonne ($576-679/t), with the average level being approximately Yuan 4,300/t, or lower by Yuan 224/t on year. The prices all include the 13% VAT.

Written by Rong Zhang, zhangronga@mysteel.com

Edited by Zhenqi Yang, yangzhenqi@mysteel.com