Chinese crude steel output seen at new highs in 2017 and 2018

Posted on 05 December 2017

Source: Nikkei

China will likely produce record amounts of crude steel this year and next, a government think tank said Monday, citing expanded infrastructure investment expected to fuel robust demand.


Crude steel output in the year through October grew 6% on the year to 709 million tons. The China Metallurgical Industry Planning and Research Institute sees full-year output climbing 3% to 832 million tons in 2017 and another 1% to 838 million tons in 2018, topping the 2014 peak of 822 million tons.

The growth comes amid a projected 8% rise in domestic demand to 725 million tons this year, 10% more than the think tank's previously forecast 660 million tons. Demand from the construction industry, which accounts for half the total, will probably grow 8% this year, with sharp rises seen in shipbuilding and container manufacturing as well.

Overall Chinese demand is forecast to edge up to 730 million tons next year.

Net exports of steel products are seen at 63 million tons in both 2017 and 2018, compared with the roughly 100 million tons of 2015 and 2016. The sharp decline owes to the growing domestic appetite for steel.

Chinese steel product prices picked up in the autumn of 2016 after a slump the previous year. Rebar prices are hovering around a six-year high. Efforts through this summer to close facilities producing subpar steel made from melted scrap, as well as temporary shutdowns and permanent closings of some steel plants this fall to combat pollution, have resulted in a tighter market.

The government has been taking steps to reduce capacity, which at one point totaled 1.2 billion tons a year against annual output of 800 million tons. It pledged in early 2016 to cut between 100 million tons and 150 million tons of capacity through 2020.

The industry reportedly has already slashed total capacity by 100 million tons, prompting speculation that cuts could exceed the government's target. But rising prices -- and thus higher profits for steelmakers -- are likely to sap momentum from the effort. 

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