Chinese demand forecast could be revised higher: worldsteel

In  releasing its Short Range Outlook for apparent steel consumption in  Tokyo on Tuesday, worldsteel dramatically hiked its outlook for Chinese  demand in 2018, largely on the back of a data anomaly. It expects zero  growth in 2019 however, as long as China launches no stimulus plan, Kallanish notes.

“There  is probable upside to this forecast,” said outgoing worldsteel  president Edwin Basson. The forecast is based on two factors. Firstly,  China’s steel demand does seem to have reached an inflection point,  where demand cannot continue to grow rapidly and will most likely  decline over the medium term. It is also premised on a lack of stimulus  from Beijing however.

As  things currently stand, a slowdown in real estate would balance out  support from the infrastructure sector, said Saeed Al Remeithi chief  executive of Emirates Steel, the head of worldsteel’s economic  committee. While there is some risk from trade tensions, the impact on  overall demand is not expected to be large (see separate article).  If a stimulus package of some kind is launched however, the forecast  for Chinese steel demand in 2019 is likely to be increased, both Basson  and Remeithi agreed.

China  had already seen a stark revision in its 2018 demand from 736.8 million  tonnes to 781mt. That was largely due to the impact of the closure of  induction furnaces however. China has made significant progress in its  plans to close down 140 million tonnes/year of induction furnace  steelmaking capacity. This had an impact of cutting around 60mt of steel  output from induction furnaces in 2018, Basson said. As this output was  not counted previously, and the output that replaced it is taken into  consideration, this led to a rapid nominal growth in demand in 2018.

Going  forward, China is unlikely to return to a path of aggressive exports as  it will continue to make progress in controlling capacity. Chinese  leaders understand that China has nothing to gain from disrupting  markets, Basson added.