China's crude steel demand to dip 1.2% in 2022- Mysteel

China's crude steel demand may edge down by 1.2% on year to around 970 million tonnes in 2022, Mysteel predicts in its newly-published forecast for the domestic steel market. The country's property sector may drag down overall steel consumption, but steel usage among other consuming sectors including manufacturing and infrastructure construction is expected to grow.

The property sector, China's largest steel-consuming sector, may experience mild investment growth next year, the report suggests, as the central government recently stressed that the country's property sector still needs to "satisfy the reasonable demand from house buyers". The government is aiming to "promote a virtuous cycle and healthy development of the sector," after noting the significant slowdown this year and the difficulties that property developers are facing.

Meanwhile, during the year ahead Beijing will continue to hold onto the principle that "houses are for living, not for speculation" and will keep a close watch on the whole sector, the report notes.

Mysteel estimates that the number of new property projects will decline by 8% on year in 2022, while the totals for completed projects and properties sold will fall by 3.5% and 5%-7% on year respectively.

China's manufacturing sector, on the other hand, may see an investment surge by 7%-9% next year, because "overseas demand will continue to lend strong support to the development of Chinese manufacturing," according to the report.

Throughout 2022, the global economy will still be on the track of recovery from the COVID-19 pandemic so demand for goods manufactured in China may stay steady, the report noted.

Moreover, the Regional Comprehensive Economic Partnership, the free trade agreement among 15 Asia-Pacific nations countries including China, Australia and New Zealand, will come into effect from the beginning of next year and is also seen as boosting demand for China-made manufactured products.

The global manufacturing industry is now at a stage of replacing or upgrading existing facilities, in order to enhance production efficiency and protect the environment, with the development of 5G technologies and artificial intelligence, the report notes. This will also boost investment in the manufacturing sector, it says.

By sector, Mysteel predicts that automobile production and sales in China will increase by 6% and 7% on year respectively in 2022, with the easing of the global semiconductor shortage and people travelling more frequently in the post-COVID-19 era.

Chinese production and sales of yellow goods will remain largely stable next year with overseas demand still seen as a key pillar, the report says. New data released by the China Construction Machinery Association show that over January-November this year, China's excavator exports increased 95.9% on year to 59,812 units, accounting for around 19% of its total sales over the same period.

For the country's white goods sector, the strong sales of real estate properties over May 2020-June 2021 (which were up 10%-20% on year in general) will likely drive up the demand for household electrical appliances over Q4 2021-Q4 2022, considering the usual time lag between sales and the completion of property projects, Mysteel notes. In China, new properties are sold usually before or during construction.

In 2022, China's infrastructure investment is expected to grow at 4%-6%, as against only 0.5% growth over January-November this year, according to the report.

This estimate is based on Mysteel's tracking of over 25 provinces/municipalities/regions across China, as their planned investment in major newly-commenced projects over January-November soared to Yuan 46 trillion ($7.2 trillion), up 72% on year. These projects usually take years to build, and their construction requires continuous capital injections.

To better accommodate domestic steel demand, China is expected to produce around 1 billion tonnes of crude steel in 2022, according to the report. This would be slightly down on output this year which Mysteel estimated at 1.02 billion tonnes. The reduction in yearly production will also help meet the country's needs to reduce carbon emissions and energy consumption, the report noted.

~ Written by Olivia Zhang, zhangwd@mysteel.com

~ This article has been published under an article exchange agreement between Mysteel Global and SteelMint.