CONF: The status quo and future of China's steel and iron ore markets
"As major commodities, steel and iron ore can be greatly influenced by the international environment. Currently, China is still in the recovery phase after COVID-19, so the market has been heavily impacted by geopolitics, high inflationary pressure in the EU and U.S., and concerns arising from the banking crisis in some countries. All these factors have resulted in increased market uncertainties and risk aversion attitudes," Shen pointed out.
In this context, China's steel industry has incurred extensive losses. Despite the introduction of many stimulus policies to support market improvement, significant uncertainties still persist. "Nevertheless, we firmly believe that the economic recovery and development are sustainable, though this process may take a considerable amount of time," Shen said.
With China's steady economic recovery and development, Shen believes that demand for steel is expected to remain at a good level in the short term. However, in the mid- to long-term, as China's urban construction reaches a certain level of development, demand for steel is expected to decline.
Moreover, policies implemented by the Chinese government in recent years also indicate a tendency to reduce the country's crude steel production. These factors, coupled with the increasing investment in electric arc furnaces domestically, there is a possibility of a gradual weakening in China's iron ore demand, noted Shen.
As the Chinese steel industry faced tremendous difficulties and suffered substantial losses during the past year, domestic steel companies were prompted to increasingly focus on cost management, Shen added.
"There has been a shift in the mindset of steel producers from high productivity and high efficiency to cost management and profit preservation. This shift is an inevitable choice (for Chinese steelmakers) to adapt to market development. Consequently, the usage of low-grade and non-mainstream iron ore resources has noticeably increased," Shen said.
However, against the backdrop of China's dual carbon goals (achieving peak emissions before 2030 and carbon neutrality by 2060), reducing emissions remains a key consideration for the future of Chinese steel enterprises. From this perspective, Shen thinks that demand for medium- and high-grade iron ore is expected to remain at a good level.
"Additionally, we are witnessing the gradual promotion and application of new smelting technologies like hydrogen metallurgy. These new technologies will undoubtedly play a positive role in the decarbonization and development of China's steel industry," Shen concluded.
Written by Zhenqi Yang, yangzhenqi@mysteel.com
Edited by Alyssa Ren, rentingting@mysteel.com
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