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The year that was: A review of China's steel industry in CY'22

The year that was: A review of China's steel industry in CY'22

 

·         Steel production drops 2%, exports stable

·         Steel, pellet imports down 26% y-o-y in CY22

·         Prices drop y-o-y across raw materials, semi- and finished products

·         Russian supplies lift coking coal imports by 14%

For China's steel industry, the year 2022 was characterized by an overarching downtrend. Steel consumption was down, so was crude steel production. Prices across the board showed a decline. SteelMint goes behind the scenes:

Lower demand pulls down production

Crude steel production was down by around 24 mnt y-o-y while around 4 million tonnes (mnt) less of steel were imported last year owing to lower consumption.

The country ended 2022 with a 2.34% drop in crude steel production to 1,006.92 million tonnes (mnt) against 1,031.05 mnt in 2021. This was mainly due to lower demand on account of the poor performance of the real estate sector and the unprecedented Covid surge which had again led to severe lockdowns.

Secondly, China's steel imports were down a sizeable 26% to 11 mnt last year against over 14 mnt seen in 2021, which was again a pointer to the lower demand levels that reigned last year.

Thirdly, steel exports remained stable at around 67 mnt belying expectations that these would drop by 5-6 mnt since China has adopted a policy of exporting value-added steel rather than commercial grades. This again proved that because of lesser home demand, mills sustained their exports at 2021 levels.

Exports remained stable because of the Russia-Ukraine conflict. Russian and Ukrainian steel exports were badly hit last year which allowed China to take over some of these markets.

China's pellet imports drop sharply amid India's duty

Pellet imports into China dropped a sharp 26% to around 17 mnt last year in comparison to 23 mnt in 2021. Iron ore imports were stable at 1,096.63 mnt (1,103.11 mnt). Imports declined in response to the 45% export duty that India had imposed in May, 2022. India has been the largest pellet exporter to China in the last two years, but its iron ore and pellet exports plunged 58% last year.

China's domestic iron ore production was up 4% to 1,000.38 mnt last year (959 mnt in 2021) despite the drop in consumption. This was mainly for two reasons. One, China's own iron ore is of low grade and merely 30-40% of the same can be utilised in steel-making. Hence, it would require producing more volume to achieve a usable level for steel-making.

Russian imports inflate coking coal imports

Coking coal imports were up by 14% in CY22 to over 62 mnt against 55 mnt recorded in the preceding year. This was mainly due to cheap imports from Russia. As the western sanctions tightened around Russia, it went searching for alternate markets, and a key one was China.

That apart, China faced issues with regard to supply from Mongolia which further offered scope for Russian imports.

Ferrous scrap imports dip

Ferrous scrap imports dipped 5% y-o-y to 0.47 mnt in 2022 (0.50 mnt in 2021) mainly because of the decline in Japanese exports of the same. China buys scrap from Japan, but the latter's own scrap generation declined because of the deceleration in its auto sector amid a global slowdown and its own increased scrap usage.

Price dynamics

Chinese steel prices were on the higher side till July last year, but started showing a downtrend from August amid the global slowdown but recouped once again in December, 2022 in tandem with global trends.

·         Iron ore: Prices of this steel-making raw material were down 25% y-o-y to $120/t , CFR compared to $150/t in 2021.

  • Scrap: Ferrous scrap import prices were down 11% to RMB 3,235/t compared to RMB 3,620/t.

  • Semi and finished steel: All showed a downtrend. Billet prices dropped 13% y-o-y to RMB 4,100/t in 2022 against RMB 4,711/t in 2021. Rebars also lost 13% y-o-y to RMB 4,374/t in 2022 against RMB 5,015/t in the year before while HRC prices went down 16% y-o-y to RMB 4,622/t in 2022 against RMB 5,489/t in 2021.

Decarbonisation step-up

China is aiming to achieve peak emissions by 2030 and net zero by 2060 for which it has unveiled several strategies one of which is green steel-making.

Working towards this end, Baoshan Iron & Steel (Baosteel), the listed arm of the world's top steelmaker, China Baowu Steel Group, signed a memorandum of understanding with Beijing Benz Automotive Co (BBAC) to jointly build a low-carbon and green auto steel supply chain by using greener raw materials for automobile production. Baosteel, thus, will become the very first steel producer in China to supply steel with significantly-reduced carbon emissions to automakers from 2023, as per a release. Starting 2026, Baosteel will reduce carbon emissions of steel used in vehicles by 50-80% via the hydrogen-based shaft furnace-electric-arc furnace process, compared with traditional steelmaking. And it will provide green steel with carbon reduction by 95% in the future.

The company aims to achieve carbon peaking in 2023, and reduce carbon intensity by 30% in 2035, followed by carbon neutrality by 2050.

Source: Steel mint

Jan 4, 2023 11:38
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