CISA CONF 2018: Seven things we learned about China steel up to 2020

Metal Bulletin looks at seven key things discussed in Xi’an last month at China Iron & Steel Association's 16th International Steel Market and Trade Conference that will have a major impact on the Asian and Chinese steel markets in the coming years.

China plans to cut another 30 million tonnes of steel capacity in 2018
China is planning to cut another 30 million tonnes of steel capacity in 2018 as part of its 13th Five-Year plan. This is two years ahead of the scheduled deadline of 2020. The continued capacity cuts and targeted 6.5% economic growth rate are expected to support steel prices in the meantime. China already cut 120 million tonnes of steelmaking capacity in 2016-2017 – 65 million tonnes in 2016 and 55 million tonnes in 2017. It has also removed 140 million tonnes of capacity for sub-standard steel at induction furnaces.

Maanshan Iron & Steel to shut two blast furnaces

Maanshan Iron & Steel plans to shut two 500 cubic meter blast furnaces this year, after shutting a total of 1.24 million tonnes of iron making capacity and 1.41 million tonnes of steel production capacity in the past two years. It has already shut down Hefei Steel’s 2.04 million tonnes per year integrated steel mill. This is part of its initiative to reduce excess production capacity and pursue environmentally-friendly production methods, which includes more investments in environmentally-friendly equipment.

Major Chinese mills nonchalant about US tariffs

Major Chinese mills such as Benxi Iron & Steel do not see any immediate impact from the US Section 232 tariffs, believing that prices will remain stable in the near-term until more concrete effects of the tariffs are apparent. However, there is some anxiety over whether demand from downstream re-rollers in South Korea and Vietnam will fall if they cut down on China-origin substrate for use in cold-rolled coils or painted coils. Chinese market participants continue to monitor the effect of the tariffs, but expect stable domestic demand to support local prices, and in turn, export prices.

Shaangang Group plans 10.5 mln tpy steel capacity in Indonesia
Shaangang Group is planning a 7.5 million tpy steel mill in Indonesia, with the aim of exploiting an estimated 30 million tpy demand gap in the major Southeast Asia economy by 2020. The mill will be fed by iron ore from Shandong Fuhai Group’s Indonesian mine. The company also plans to construct a “Shaanxi Steel Industrial Park” in Indonesia, which will have final steel production of 3 million tpy of steel bar, wire rod, sections, strip, plates and pig iron.

China consumed 140 mln tonnes of ferrous scrap in 2017
China’s steel mills consumed 140 million tonnes of ferrous scrap in 2017. Overall consumption is estimated at 160 million tonnes after including demand from other smelters, stockists and other small downstream sectors. The steel scrap consumption rate was at 103 million tonnes in 2017 for steel-making by, up 38.95 million tonnes from the previous year. This was due to the excess supply of ferrous scrap in China after governmental controls shut down induction furnaces in a bid to reduce pollution levels in the country.

China-origin steel made up 58% of South Korea’s total steel imports in 2017
China-origin steel made up 58% of South Korea’s total steel imports in 2017, according to the Korea Iron & Steel Association. About 11.54 million tonnes of China-origin steel landed in South Korea last year, 26% of which was hot-rolled coil. 12% of the volumes were galvanized sheet while steel bars made up 9%. Wire rod made up 8% while rebar and plate made up 7% each. Cold-rolled coil made up 4%. South Korea’s steel imports dropped in 2017 due to a slump in the shipbuilding industry and domestic efforts to reduce imports. Shipbuilders consumed 10.6 million tonnes of steel in 2017, down from 12.3 million tonnes in 2016 and 12.7 million tonnes in 2015.

Chinese mills step into new age of steelmaking
Chinese steel mills will continue to strive for improvements, especially in structural changes and meeting the demand of the country’s economy, according to Chi Jingdong, vice-chairman of the China Iron & Steel Association. Chi identified environmental protection as an area that the Chinese steel industry would focus strongly on in order to support the central government’s aim of reducing industrial pollution, as well as to satisfy citizens’ calls for a liveable and healthy environment free from industrial smog. Mills such as Ma’anshan Steel also expect competition among steelmakers to intensify even as the industry starts to cater to diversifying downstream demand, which is focused on creating technologically advanced housing, automobile and cities.

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