China 2021 steel market at dynamic equilibrium

Posted on 13 January 2022

For 2021, China's steel market had achieved "dynamic equilibrium", with steel production having satisfied robust steel demand from the rapidly growing downstream industries over January-April and then having eased since May in tune with slower growths in demand as well as restrictive measures, stated Chen Derong, chairman of China Iron & Steel Association (CISA), according to a post on CISA's website on January 11.

Chen's speech was presented at CISA's work conference on January 10 when a few other related ministry, association, and steel company officials presented too, summarizing the industry's performance in 2021 and highlighting the few key tasks for 2022.

"China's steel demand and supply have been basically balanced (for 2021), which has created a good environment for the downstream industries," he shared, repeating the association's estimate on an annual decline of 35 million tonnes in steel output to about 1.03 billion tonnes for last year.

By the end of 2021, China's finished steel inventories had subsided to around the same level of the previous year too, he highlighted.

In the first 11 months of 2021, China produced 946 million tonnes of crude steel, down 2.6% on year, and the country's apparent steel consumption in crude steel was equivalent to about 908 million tonnes, down 5.2% on year.

As for CISA's member steel mills, they had achieved rather satisfying results over January-November despite the surges in the steelmaking raw material prices, as their gross profit hit a record high of Yuan 351.7 billion ($55.2 billion), or up 86.46% on year, and their profitability went up 1.48 percentage points on year too to 5.54%

Chen also shared the self-sufficiency ratio of raw materials in China's steelmaking, noting that domestically-produced iron ore and scrap contributed to 37% of China's steel production over January-October, or up 2 percentage points on year, among which scrap accounted for 22% of China's steel output during the period.

CISA has set and submitted the self-sufficiency targets for steel scrap, domestically-produced and overseas-invested iron ore for 2025, 2030, and 2035 for the reviews of four related governing authorities including the National Development and Reform Commission, he shared.

Concentration in China's steel industry had progressed in 2021, with the top 10 steel producers contributing to 40.39% of the country's total steel output over January-November or 54.85% for the top 20, or up 2.99 percentage points and 3.26 percentage points on year respectively, according to him.

As for 2022, China's economy may face the pressure from shrinking demand, rising supply, and weakening market sentiment, while the country's steel demand may be maintaining at 2021's level on lower demand from the property market but higher demand from infrastructure construction and the manufacturing sector.

Under the circumstances, steel output and exports need to be consistently monitored and analysed, communication needs to be enhanced between steel producers and downstream industries such as engineering and machinery, home appliances, electrical and electronics products, and containers for the safety and stability of the supply chains, and iron ore futures market needs to be further optimized, Chen proposed.

He called for the whole steel industry's efforts in the next two to three years to make some progress in building up a "new image".

Source : Mysteel Global