Can China's economic growth survive falling steel appetite?

China's crude steel output and apparent consumption are expected to dip in 2024 by 0.3% and 0.2% respectively from the prior year, Mysteel predicts in its newly-published forecast for the domestic steel market of this year.

On the demand side, China's property sector - the largest steel consumer of the country - may have reached the bottom level, but it is more likely to bounce along the bottom for quite some time instead of reversing up soon, according to the report.

Specifically, the decrease in property sales may narrow in the first quarter this year and reverse the downtrend in the second half. The area of newly-launched property projects may see positive growth in the second half of this year or in the first half of next year. For 2024, this indicator is estimated to decrease by 5-10% on year.

The infrastructure sector will continue to serve as a cornerstone for the domestic steel market, and the investment in the sector may see a 7% on-year rise this year.

Meanwhile, the manufacturing sector is expected to keep recovering this year, and the investment in this sector may increase by 7% compared with the previous year, indicating a resilient demand for steel, Mysteel estimates in the report.

Domestic automobile, white goods, shipbuilding, and machinery markets are saturated to some extent, while the exports of these products may keep rising this year, the report points out.

For 2024, China's steel exports may post a decrease from the previous year's high level under the pressure of increasing anti-dumping measures from other countries and regions, Mysteel estimates in the release.

At the same time, in order to reverse the adverse situation of importing high-priced steelmaking raw materials and exporting steel products at low prices, China may take measures to tighten the supervision of steel export procedures, which will possibly restrain steel products delivered to overseas markets this year.

For 2023, China's steel exports totaled 90.26 million tonnes, jumping by 36.2% on year, while the total export value dropped by 8.3% on year to $84.6 billion, according to the latest data released by China's General Administration of Customs (GACC) on 12 January.

The higher steel export volume and lower export prices in 2023 were mainly blamed to the imbalance between supply and demand in the country's domestic steel market, the report said.

On the supply side, China's crude steel production stayed high at 1.019 billion tonnes in 2023, almost the same level from the previous year, according to the latest data released by the country's National Bureau of Statistics (NBS) on January 17.

However, the decrease in China's crude steel output is likely to become the general trend in the future as domestic steel demand has plateaued since 2020.

If the country's crude steel output continues to stay high, the profits of the ferrous industrial chain are likely to concentrate in the upstream raw materials end, and Chinese steel producers and traders may continue to operate at low profit margins or suffer deeper losses. This is not in line with the industry's target of high-quality development, Mysteel warns in the report.

With expected decreases in both steel supply and demand, China's steel average price this year is likely to be slightly lower than that for 2023, per the report.

For example, the average rebar price in Shanghai may dip by 0.6% on year to Yuan 3,900/tonne ($542/t) for 2024, and that of hot-rolled coil is estimated to reach Yuan 4,000/t, down by 0.2% from the previous year, according to Mysteel assessment.

Note: This article has been written in accordance with an article exchange agreement between Mysteel Global and SteelMint.