China: steel industry enters a new phase of evolution

With mounting downward pressure, China's steel industry must accelerate its pursuit of innovative, high-quality development to control output, reduce inventories and increase the value-added of steel products, government officials and industry experts said on Friday.

They also said the industry is likely to see some recovery in demand in the coming months.

“China's economy has already stabilized to recover from a growth slump in the second quarter as the COVID-19 epidemic becomes better controlled and growth policies are having a positive effect,” said He Wenbo, Executive Chairman of the People's Republic of China. Ferrous Metallurgy Association at an industry event.

“We expect steel demand in the third quarter to improve gradually compared to the second quarter, although not quickly,” he said, predicting that steel demand would also gradually increase in the second half of the year.

On Thursday, a meeting of the Politburo of the Central Committee of the Communist Party of China called for efforts to consolidate the upward trend in the economic recovery.

The meeting stressed that macroeconomic policy should play an active role in expanding demand, and fiscal and monetary policy should effectively compensate for the lack of social demand.

He also called for work to ensure that the real estate market remains stable, adhering to the principle that "houses are for living, not for speculation."

The head of CISA also predicted an increase in infrastructure investment in the third quarter. On the downstream side, the real estate sector is stabilizing, shipbuilding orders are piling up, and car production and sales are also on the rise, he said.

However, the industry faces numerous uncertainties and challenges. Therefore, it is necessary to intensify efforts for qualitative development, analysts and officials believe.

Data from the National Bureau of Statistics showed that average daily crude steel output rose month on month from January to May despite weak demand. In May, average daily production was around 3.12 million metric tons, which meant that annual production would reach 1.1 billion tons if such a high level of production continued.

According to the association, at the end of June, the total stocks of key CISA member enterprises amounted to 16.95 million tons, which is 50% more than at the beginning of the year, and 23.1% year on year.

Zhang Haideng, Deputy Director of the Commodity Industry Department of the Ministry of Industry and Information Technology, said at the CISA event that the industry is facing the most severe test since overcapacity reduction began in 2016 and needs to be coordinated. with mining and processing industries.

The steel industry must remain confident and continue to accelerate green and low-carbon transformation, adapt to the new reality through active supply-side reforms and innovative products to curb inefficient supply and stimulate new demand. According to him, he must also coordinate the prevention and control of COVID-19 with industrial activities.

Steel mills should cut output and the relevant authorities should intensify efforts to stabilize coking coal prices as the recent rise in prices for key raw materials added to existing pressure on the industry, said Xu Xiangchun, chief information officer and analyst at steel consultancy Mysteel. .

“In an environment of oversupply and falling steel prices, cost control and efficiency gains are important for businesses, but it is even more important to actively reduce production,” he said.