A further contraction of China's real estate sector
and slowing growth in exports of manufactured goods will likely see Chinese
steel demand decrease slightly in 2023, Luo Tiejun, vice president of the China
Iron and Steel Association (CISA), told delegates attending Mysteel's annual
conference in Shanghai on December 30. The effects of the central-government
measures to stabilize the economy may emerge gradually with Beijing's optimized
COVID-19 policies, Luo suggested, saying these may benefit the domestic steel
industry and lend some support to steel consumption.
However, "the
ongoing recession in the property sector and the slowing growth in manufactured
exports are likely to be a drag on steel consumption," he warned,
recommending that delegates pay more attention on the impact of COVID
infections on the country's economy and the recovery of the real estate sector.
Steel demand from
users was not so robust this year, while steel output has not seen any
significant on-year decrease, he pointed out, a combination that led to a drop
in steel prices and which squeezed mills' profit margins.
For the whole year of
2022, China's total crude steel output is expected to reach about 1.02 billion
tonnes, as against the 1.035 billion tonnes for the previous year, CISA
estimated.
Over January-November,
crude steel output reached 935 million tonnes, lower by 1.4% on year, while the
country's apparent crude steel consumption was 887 million tonnes, falling by
2.7% on year, according to Luo.
For the first eleven
months of this year, the profit margin of China's ferrous mining and processing
sector was only 0.3%, ranking the sector at the bottom among the country's 41
industrial sectors, indicating the limited effects that production curbs had on
easing the difficulties the industry faced this year, Luo warned.
Over January-November,
the gross profits of CISA's member steel mills reached an estimated Yuan 98.3
billion ($14.1 billion), lower by a huge 72.5% on year, while the profit margin
on sales among CISA's member mills was only 1.66%, down 3.88 percentage points
from the same period last year, Luo pointed out.
For the coming year,
should the central government decide on a further reduction in steel
production, the basis for deciding the target should be installed capacity, Luo
suggested, instead of taking the previous year's crude steel output record as
the base, as is the case currently.
Source: Steelmint