China's steel consumption up 15.3% in Q1 CY '21 - CISA

China's domestic steel consumption jumped by 15.3% on year to 259 million tonnes during the first quarter of this year, thanks to the steady recovery of demand among end-user sectors, according to an April 27 report from the China Iron & Steel Association (CISA) on the steel industry's Q1 performance.

CISA estimated that actual finished steel consumption increased 47% on year in Q1, a surge that reflected disruptions to consumption during January-March last year as China battled the coronavirus spread and domestic steel demand stalled, CISA pointed out. Among this year's Q1 total, consumption by the construction sector increased 49% and the manufacturing sector by 44%, CISA said, without providing exact numbers.

Steel production has remained stable to satisfy growing demand, CISA stated. Over January-March, China's crude steel production increased 15.6% on year or 17.3% from Q1 2019 to 271 million tonnes, while finished steel output climbed by 22.5% on year or 22.4% from Q1 2019 to reach 329 million tonnes, as Mysteel Global reported.

Thanks to stable production and strong consumption, the steel industry maintained steady growth in profits last quarter, according to the association, while the number of producers suffering losses was much less. For the first quarter, the profits of CISA's member mills totalled Yuan 73.4 billion ($11.3 billion), surging 247.4% on year.

The number of loss-making companies accounted for 13.6% of the total, which was also lower by 13.6 percentage points on year.

Despite the rise in profits, the steel mills are still facing pressure from high raw materials costs, CISA pointed out, noting that in Q1, "iron ore prices rose much faster than steel prices".

Mysteel SEADEX 62% Australian Fines hit almost an 11-year high of $193.65/dmt CFR Qingdao on April 27, higher by nearly 22% from the end of 2020. Meanwhile, Mysteel's HRB400E 20mm dia rebar price, the representative product of Chinese steel-price movements, refreshed its 9.5-year high to reach Yuan 5,243/t including the 13% VAT as of the same day, up 20% on the same comparison.

Looking ahead, China's steel industry still faces major tasks and challenges, including ensuring that crude steel output this year declines on year, maintaining supply-chain stability, and moving towards carbon peak and carbon neutrality, according to CISA.

Steel imports and exports will be an effective way to adjust the domestic supply-demand balance, it notes. Against the backdrop of the crude steel output cut this year, CISA hopes that "the country will roll out an export tax adjustment policy as soon as possible".

In the report, CISA called on the central government to continue promoting the export of high value-added steel products to satisfy overseas demand and build the image of high-quality products. On the other hand, it proposed that Beijing "moderately adjust the import tariffs for preliminary steel products and facilitate recycling of iron-steel materials, so as to increase the supply of Fe elements".

As for maintaining stability in supply chains, CISA reiterated that effective measures should be taken to expand exploration and exploitation of overseas iron ore deposits and to curb the fast and continuous rises in iron ore prices.

In another aspect, the steel supply structure needs to be optimized to be better synchronized with China's mode of economic growth, according to CISA. Although domestic steel supply is sufficient - considering existing capacity and the planned new investments in facilities - the steel industry's structure still "has some way to go" to match the economic development that is more balanced and focused on quality, it maintained.

Currently, demand from the manufacturing sector is robust, mainly thanks to strong exports of products with significant steel content such as home appliances. However, just how long exports of these goods stay strong is greatly uncertain and might only be temporary, according to CISA, as overseas supply of such products may soon catch up as their manufacturers' operations return to normal after the COVID-19 disruptions.

Written by Olivia Zhang, zhangwd@mysteel.com

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