China: Infrastructure sector to boost steel demand in CY'22

The infrastructure sector is set to boost Chinese steel demand in 2022, as per a recent news published in the China Metallurgical News.

Chinese government's investment plans:

a) Railway sector: In 2020, Chinese authorities encouraged investments up to CNY 318 billion in the railway sector, while, the total steel consumption was estimated to be around 10.59 million tonnes (mnt). The report anticipates consumption to increase further in 2022.

b) UHV transmission: Steel demand for ultra high voltage (UHV) transmission lines is also predicted to increase as demand for grain-oriented electrical steel sheets is expected to rise. Demand for galvanized steel sheets, hot-dipped galvanized channels, reinforcing bars, cold-rolled steel wires, and galvanized steel pipes, as well as transformers, for construction of substations, will increase. Around 500kV transformers will require 300 tonnes of electrical steel, which account for about 35% of the total cost of a transformer.

c) Energy vehicle charging stations: Market participants estimates that 3.5 mnt of steel will be used to build 7 million charging stations by 2025, which, in turn will boost demand from the sector.

In addition to the above, the demand for rebar and wire rods will also rise due to large scale infrastructure projects like roads, railways, bridges, civil engineering and machinery.

China's Chongxin Futures had invested CNY 100 million in public road transportation where 1,200 t of steel was consumed, CNY 100 million in the energy sector (1,200 t of steel consumed), CNY 100 million in railroads (1,400 t steel consumed), CNY 100 million in railroads and urban railroads (3,000 t of steel consumed). An investment of CNY 100 million will increase steel consumption by 10,000 t.

With all these investments, steel demand in China is expected to reach 199.7 mnt, an increase of 11 mnt or 5.93% y-o-y. Also, if infrastructure activities remain supported throughout, then steel consumption is likely to increase by 7.68% to 229.99 mnt in 2022.

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