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The annual growth rate is based on its forecast for this year’s total crude steel output of 780 million tonnes, according to a report by the government-backed think tank.

On the demand side, the institute forecasts the country’s steel consumption to reach 693 million tonnes this year. It expects consumption to increase by 3.2% to 715 million tonnes in 2014.

“The economic environment will be better in 2014 both at home and abroad, so major downstream industries except shipbuilding could see steady growth, resulting in more steel demand,” Li Xinchuang, head of the institute, said at a press conference on Friday December 6.

The top three steel consumers of 2013 were the construction industry, the machinery industry and the auto industry, with estimated consumption of 381 million tonnes, 133 million tonnes and 46.5 million tonnes, respectively, according to MPI data.

However, even if the country’s steel production grows at only 3.8% in the next year, the growth rate will still outpace that of demand and weigh on steel prices, market observers contacted by Steel First said.

Li also said that it would remain difficult for steelmakers to profit in the next year, given the serious overcapacity in the country’s steel industry.

During the first ten months of this year, China’s steelmaking sector saw a profit of just 0.84 yuan ($0.14) per tonne of steel produced.