How will China achieve balance in steel production, demand?

China's finished steel demand and crude steel output will stabilise in the long run. This key observation and how the balance can be achieved were explored at the 20th China Iron and Steel Raw Materials International Conference held in Dalian a few days ago.

Changing market trends

He Wenbo, party secretary and executive chairman of the China Iron and Steel Association (CISA), said at the conference that new changes have taken place in China and the world steel market.

• First, the rate of China's steel production has begun to decrease, and the growth rate of overseas steel production has been higher than that of China, which has rarely happened in the past.
  In the first eight months of this year, China's crude steel output increased 5.3% y-o-y, while overseas crude steel output in ex-China geographies increased 18.1% y-o-y. With the gradual recovery in supply, overseas crude steel production has returned to pre-pandemic levels.
  
  

• Secondly, China's steel imports and exports scenario is changing. The Chinese government has adjusted the steel export tax rebate twice this year. At present, the export tax rebate for steel products has been withdrawn. With the gradual easing of overseas steel supply and demand tensions and after the impact of the steel export policy adjustments is eventually felt, it is expected that China's net crude steel exports will continue to decrease, and steel imports-exports will balance out.
  
  

• Thirdly, China's timely implementation of crude steel output curbs to bring about a supply-demand balance. Steel demand has slowed down in the second half of this year, and steel exports are also expected to decrease.
  
  

High raw material cost impact

The excessively high cost of raw materials has greatly increased the cost of production, resulting in the excessive increase in downstream steel purchase costs. This, in turn, directly affects customers' purchasing intentions, which is an important factor in the phased decline in steel demand.

Thus, changes in market demand as well as changes in supply chain costs have jointly led to a decline in crude steel production in China. But, in the long run, China's steel demand and crude steel production will remain stable.

How to achieve long term stability?

Speaking on how to achieve long-term stability in the industrial supply chain and green and low-carbon development, He Wenbo had a few suggestions:

• China must address the long-term needs of the future and increase the development of global iron ore resources. Major mining companies in the world should put more effort in developing mineral resources. Chinese steel companies should also further put a strong focus on developing overseas resources.
  
  
• Steel mines must work together to promote green and low-carbon processes in the entire industry value chain.
  
  
• International mining companies should take the initiative to change the current irrational pricing system for iron ore.
  
  
• Authorities should re-assess the mining value of China's iron ore resources and contribute to the global iron resource supply reservoir. China's iron supply must be sustained and appropriately increased, while it should vigorously promote development of its ferrous scrap industry, but continue to assure iron ore resource security to its own user-segments.