China’s steel output set to top a billion tons this year

China story steel production
Zhao Jiankang/AdobeStock

If we were worried about China’s dominance of global steel output over the last decade, the next decade is looking like it may be even worse.
Having bounced back robustly this year from severe coronavirus lockdowns in Q1, China is on track to top 1 billion tons of steel production by the end of 2020, beating 2019’s 996.3 million tons despite steel-consuming industries suffering a lockdown.
Indeed China is the only major producing country to have increased output this year, up 5.6% at the end of October. Europe, North America, Japan, South Korea, and India are all down over the year cumulatively, leading to a global 1.9% reduction.
Cut-to-length adders. Width and gauge adders. Coatings. Feel confident in knowing what you should be paying for metal with MetalMiner should-cost models.
Despite a small decrease from record levels in August and September, China’s October output was still up on last year.

The month-on-month fall was put down to production restrictions implemented by steel mills to control air pollution, principally to sintering and blast furnace output. And while pollution controls are expected to be lighter this year than in previous winters, such action could be a harbinger of further restrictions during Q4 2020 and Q1 2021. An article in Nasdaq though suggests Chinese mills have been migrating to new less-polluting capacity over the last year and to have retrofitted pollution-control equipment on older plants so any restrictions will be a lighter touch this year than in past years. Even so, any enforced closures would reduce availability and could support prices during the winter months.
Steel mills have been incentivized by high prices this year to boost output. Strong enough in the summer to even suck in low-cost metal from regional suppliers like India for a while. But the article suggests government credit-tightening measures aimed at the property market may lead to a slowdown in demand, even as government-funded infrastructure projects continue to provide a dynamic from the public sector.
One note of caution appears in a Yahoo Finance post advising rising levels of steel production have led to high levels of finished steel inventories of late, suggestive that peak demand may already have passed at least for the quieter winter months for the construction industry.
While output and demand have been strong this year, it should not be overlooked that much of this strength has been stimulus-boosted.
China’s structural overcapacity for steel output remains, albeit with increasingly more efficient and less-polluting plants, but all that new investment will demand payback for years to come.
Consolidation will prove expensive, and painful, when demand eases after the current stimulus programs. Beijing can’t pump the economy with stimulus forever, and current programs will see the economy through the winter and into next year — but the fear remains among “rest of the world” producers that 2021 could see the resurgence of exports as a relief valve for all that capacity.
Sign up today for Gunpowder, MetalMiner’s free, biweekly e-newsletter featuring news, analysis and more.

Leave a Reply

Your email address will not be published. Required fields are marked *

Scroll to Top