In a recently held industry forum, Yu Yong, head of China Iron and
Steel Association (CISA) said that the country’s steel industry should be
confident about the domestic steel demand in 2019 amid the increased
infrastructure investment coupled with rebounded growth in ship manufacturing
segment. He also added that the steel demand in machinery and home electric
appliance segment will also remain stable in 2019.
China’s infrastructure investment (excluding electric power) saw a
growth of 3.7% y-o-y basis in the first eleven months of 2018 (Jan-Nov) and the
growth rate for 2019 is forecasted to be higher according to Mr. Yu.
However, he noted that the steel demand in car manufacturing is
uncertain as the outlook for car sales in the new year will largely depend on
policies to boost consumption. Also, the demand for steel in the real estate
sector may shrink as investment slows and construction declines.
Contrasting view and challenges ahead
Yu's positive views about China's steel prospects contrast with the Worldsteel
Economics Committee's predictions. The committee said no growth in China's
steel demand in 2019 is likely to make the world steel demand growth drop to
1.4% from 3.9%.
Meanwhile, along with giving positive views on Chinese steel
demand, Yu have also added that the country’s steel sector is likely to face
challenges as new economies spring up which would lead to a drop in demand for
steel in China's growing emerging sectors, and rising requirements for steel
quality from manufacturers in traditional sectors. Other challenges in China's
steel markets lie in the rising cost of raw materials, financing difficulties
and tightening environmental regulations.
He also acknowledged that the pressure of oversupply from
illegally-added capacity and new projects remains as mills try to cash in on
high-profit margins. The main source of China's economic growth has turned to
consumption from investment, which leads to lesser demand for steel products
and higher requirement of products quality.
Solution to the problems
In order to tackle the challenges, Yu suggested that a major campaign in 2019
will be optimising production structure, adjusting layout of steel mills and
pushing merger and acquisition.
Apart from this, more measures are expected to be rolled out from
steel companies. For example, Ansteel Group Corp said at the forum that it
would continue with its reforms in operational mechanisms to enhance its
productivity. Other measures include further encouraging the mixed ownership
reform and a more relaxed regulatory environment from the government.
Yu's predictions follow stable growth in the steel industry in
2018. According to the CISA the nation produced 708 MnT of pig iron, 857 MnT of
crude steel, and over 1 billion tonnes of steel during the year.
Source: steel mint