China's sector-wise steel demand projected at 959 mn t in CY'22

*Credit squeeze in real estate sector may affect steel demand
*Fall in exports to impact machinery, container sectors
*Shipbuilding to register robust growth in steel usage

China, the world's top steel producer, witnessed a drop in steel production to an estimated 1.03 billion tonnes (bn t) in CY'21 from 1.065 bn t in 2020, the China Iron and Steel Association (CISA) announced on 10 Jan'22.

China's steel output declined by 35 mn t in CY'21 as the country is moving ahead with its de-carbonisation goals. China produced 946 mn t of steel in the first 11 months of CY'21, down 2.6% on the year.

In its latest forecast, China's Metallurgical Industry Planning and Research Institute (MPI) estimates through the analysis of the operations of various downstream industries, and considering some downstream steel-consuming sectors that are not included, the downstream industry consumption method predicts that China's steel demand will reach about 959 mn t in CY'22.

The MPI has employed two methods to predict China's steel consumption in CY'22: a) the sector-wise outlook based on downstream demand and b) the steel consumption coefficient method. The net demand predicted is derived from the weighted average of the respective values attained.

Sector-wise outlook

In general, the MPI expects demand to turn weaker in CY'22 under the continued output and carbon emission restriction policies and a down-cycle for the property industry and exports.

Real estate: The government's crackdown on speculation will continue along with stabilising land prices, housing prices and financial management. The commercial housing market will better meet the reasonable housing needs of buyers. It is estimated that the demand for steel in the national construction industry in CY'22 will be about 551 mn t, a slight decrease of 0.9% y-o-y.

Machinery: The continuous expansion of domestic demand has provided strong support to the machinery industry. However, due to the uncertainty of the global pandemic situation, stricter foreign trade situation and volatile raw material prices, the pressure on the machinery industry is acute. It is estimated that the demand for steel in the machinery industry will be about 170 mn t, a slight increase of 0.6% on the year.

Automobile: Automotive chip shortage and tight power supply impacted growth in the sector in CY'21. The shortage of semiconductors will gradually ease in CY'22 and the production of automobiles may increase to about 26.9 million units, a y-o-y increase of about 4.3%. The demand for steel in the automotive industry is expected to be about 56 mn t in CY'22, up 2.8% on the year.

Energy: The focus on non-fossil energy is set to grow stronger. Newly installed power generation capacity will show a downward trend. The construction of the grid structure will address the shortcomings of the grid infrastructure and one crude oil network for the whole country will be formed. It is estimated that demand for steel from the energy industry will be about 40.6 mn t, a fall of 2.2% on the year.

Shipbuilding: The demand for container shipping will be strong and the global shipbuilding market will be active. In 2022, as global supply chain bottlenecks ease, pent-up demand will continue to be released. The national shipbuilding completion volume will keep growing and steel demand is expected to be about 14.5 mn t in 2022, a year-on-year increase of 8.2%.

Appliances: In 2022, the home appliance market will continue to grow, continuing the trend of domestic home appliance consumption upgrade, accelerating product upgrade as well as exports. It is estimated that demand for steel from the industry will be about 15.8 mn t, up 4.6% y-o-y.

Railways: The scale of national railway investment will expand in 2022, with an additional operating mileage of about 4,000 km. Based on this calculation, the demand for steel will be about 4.3 mn t, a y-o-y increase of 7.5%.

Containers: With the gradual and effective control of the pandemic and the easing of congestion at US ports, the global container turnover rate will gradually return to normal, which may lead to a decline in the number of new international orders in 2022. China's container output will decline to a certain extent in CY'22. It is estimated that the demand for steel from the container industry will be 5.8 mn t, down 34.8% y-o-y.

Hardware: Increase in sales area of commercial housing provides a market foundation for the development of the hardware industry, driving the growth of domestic steel consumption for construction hardware. Decline in the scale of new real estate construction and the implementation of the real estate tax pilot will affect the growth of demand. It is estimated that demand for steel from the industry will be about 25.3 mn t, down 0.8% y-o-y.

Steel and wood furniture: Furniture exports have surged after the pandemic. In CY'22, as the global epidemic eases and the foreign furniture industry resumes work and production, China's furniture exports may decrease. However, domestic demand will remain stable. Steel demand from the industry will be about 15.8 mn t, a y-o-y decrease of 3.1%.

Bicycle and motorcycle: In 2022, exports are expected to weaken. It is estimated that steel demand from the bicycle and motorcycle industries will be around 4.8 mn t, a y-o-y rise of 2.1%.

Consumption coefficient

The GDP consumption coefficient method and the fixed asset investment consumption coefficient method are adopted to predict steel consumption in CY'22. Using the data as a forecast parameter, the MPI estimates that China's steel demand in CY'22 will be 956 mn t and 909 mn t, respectively. Combining the two forecast results, China's steel demand in 2022 will reach about 928 mn t.

On the whole, a comprehensive forecast of China's steel demand in CY'22 is carried out through the downstream industries' consumption method and the steel consumption coefficient method. On a weighted average basis, steel demand in 2022 will be 947 mn t, a decrease of 0.7% y-o-y.