MEPS reported that under reporting in the Chinese steel industry means that market analysts could have under estimated China iron ore demand by as much as 118 million tonnes over the next two years.
MEPS said under pressure to meet government targets to close out dated polluting capacity by the end of 2010, it appears that Chinese mills did not fully declare their steel production.
MEPS estimates that crude steel output in the country was under-reported by as much as 47 million tonnes and production of pig iron by 44 million tonnes. Consequently production of crude steel in 2010 could have been as high as 674 million tonnes. This compares with a figure of 627 million tonnes published by China National Bureau of Statistics.
Some indication of the true scale of steel production is given in the latest production data for 2011 released after the government’s 2010 campaign against out dated steelmaking capacity ended. This shows steel output early this year running at an annualized rate of production of 706 million tonnes.
MEPS said this compares with estimates by MEPS that crude steel production in 2010 peaked at an annual rate of 739 million tonnes. The highest annual run rate as stated by China National Bureau of Statistics for 2010 was 674 million tonnes. This implies that crude steel production at the beginning of this year, traditionally a period of low output in the Chinese steel industry was 5% higher than peak rates in 2010. Analysts agree that this is unlikely.
A Chinese steel industry producing at even higher levels than previously thought has global ramifications for commodity prices. The cost of coking coal and iron ore, key ingredients in steelmaking are likely to remain high if miners have downplayed the scale of future Chinese demand.
Mr Peter Fish MD of MEPS International said “Chinese under reporting of steel output could explain the high cost of iron ore in 2010. This could also have a major impact on the mining companies’ predictions for demand in 2011 and 2012.”
( source: www.steelguru.com )