Tag Archive for China steel demand

China domestic steel peaking? Might it result in cancelled rail projects? Or steel dumping?

From Bloomberg, Jul 7, 2015

China’s demand for steel has peaked, if the Japanese experience of the 1970s is anything to go by. That could spur more trade conflicts as the nation ships its excess production overseas.

To read the entire article, go to http://bloom.bg/1HLoZ2R

A few key observations:

The current decline in Chinese steel output may signal that the growth period for the commodity has ended in a country where the pace of economic expansion is slowing.

Risaburo Nezu, a senior research adviser at RIETI, a think-tank linked to Japan’s trade ministry, expects a prolonged slump, with an absence of growth in demand likely for the next 10 or 20 years.

“Once a country attains a certain stage of economic development, demand for steel stops growing,” Nezu said last week in an interview. “China is left with excess capacity that’s said to be 300 million tons to 400 million tons, equivalent to three to four times Japanese output.

If true, there are economic consequences from Brazil to Mongolia and South Africa to Japan. This will impact rail and mine and port greenfield projects around the world. Are planners prepared?

The situation in China “could trigger more cases of trade measures among steel suppliers” to protect earnings, said Yoku Ihara, president of Growth & Value Stock Research.

Bloomberg reports that “Steel demand in China will shrink this year and next in the first annual contractions since 1995 according to the World Steel Association in April.

Crude steel output will shrink as much as 2 percent this year, the first contraction since at least 1990, according to the China Iron & Steel Association.”

“Globally, supply of steel will exceed demand by 657 million tons in 2016 compared to an estimated gap of 645.8 million tons in 2015, according to an estimate compiled by the OECD.

This threatens a glut of drawing board plans for global mines, ports, and rail projects. Most based on very high China growth of the 2003-2012 period.  Now an obsolete assumption.