Chinese finished steel forecast to increase 5%

Sheffield UK based market analysts, MEPS forecasts the output of all finished steel products for sale this year in China at 740Mt.

 This equates to an annual gain of 4.7%. MEPS’ estimate total flat products mill production will be 292Mt – up 4.2% on the figure in the previous twelve month period. Total long products output is projected to expand by 5% to 44Mt. Although these growth rates are modest compared to those in most of the previous decade, the projected tonnage increase is still substantial, at more than 33Mt. Apparent consumption is expected to expand by a slightly smaller amount.

Improving market sentiment and rising steel prices led to Chinese mills ramping up hot rolled coil production during the first quarter of this year. Buying activity remained subdued so stock levels continued to expand. As a result, MEPS believe producers will reduce output as 2013 progresses. Despite this, the annual total is expected to rise by almost 7% in the current twelve month period relative to 2012.

A lack of orders for new vessels continues to hurt the Chinese shipbuilding industry. The country is not alone, with neighbouring Japan and South Korea struggling with the same problem. Demand for plate in the Asian region is contracting and consequently, exports are increasingly difficult to achieve. MEPS believe that the outturn of plate in China will decline, once again, this year.

Growth in output of cold rolled and coated steel is set to slow in 2013. The prospects for the end-user segments of these products - automotive, white goods and construction - is for modest expansion.

Slower growth in the production of wire rod and reinforcing bar in 2013 to a more sustainable rate following the recent trend of double-digit annual percentage rises is also expected. Construction of affordable homes in China will continue. This should support further increases in output, albeit at a reduced level compared with 2012. A range of infrastructure projects is planned, including hydro, nuclear power and dams. However, there is some concern regarding funding at the local and national level of government. Furthermore, the authorities are attempting to dampen the real estate sector.

Output of heavy and medium sections, including rails, is predicted to increase by around 5.5% this year - similar to the gain recorded in the prior twelve month period. A comparable rise is forecast for merchant bar production in 2013. This follows stagnation in the previous year. The Chinese engineering and construction industries are showing signs of expanding activity. Moreover, further strong growth is predicted in overseas sales.

Source: MEPS World Steel Outlook Quarter 1 www.meps.co.uk