In accordance with the forecast of Metallurgical Industry Planning & Research Institute, production of steel products in China in mid-term perspective will grow and in current year it is to rise for 10% making 640 M tons, while consumption to grow by 60 M tons to 580 M tons.
In the beginning of the year steel production was forecasted at 652 M tons for 2010. However, results of the first four months prompt that this assessment is outdated. In January-April the production of steel in the country increased by 24.5% and made over 158 M tons. According to NBS data, steel smelting in China in April reached 55.4 M tons, which is 27% over the same month of the last year. Daily average steel smelting in April made 1.83 M tons. If such rate remains till the end of the year, annual production will reach 660 M tons.
Output of finished steel products in the country in March 2010 reached over 68.2 M tons which is 21.4% higher than February level and 20.5% higher than the same month of the last year. This is a record high level of monthly finished steel output for the country.
However, some experts believe Chinese economy requires 500 M tons of steel for a stable development. Thus, excess production in their opinion to reach 160 M tons this year.
A peak of steel consumption is forecasted at the level of 800 M tons. It can be reached in two years. After that, consumption growth to stop. This is essential for spot markets.
From our point of view, steel consumption growth in the country will have a lower rate. And even if steel consumption in China to reach 800 M tons, it is more likely to happen not earlier than 2013-2014. More rapid growth of ferrous metals production which is to meet local consumption, is likely to lead to an essential oversupply, which can be balanced only by exports. And a massive export expansion means some problems for China such as trade restrictions from EU, for instance, as well as from some other countries.
Moreover, Chinese government keeps its restriction policy for export of products which production is essentially harmful for environment, as well as products with low added value and energy inefficient products. A major part of production increase is in account of construction steel products, hot rolled steel and cold rolled steel products.
In January-April 2010 Chinese export of finished steel increased by 98.5% to 13.02 M tons, while import increased by 15.7% to 5.61 M tons. This reflects recover of international market. By result of the year, steel export can reach 35 M tons. Main export destinations are the countries of South-East Asia.