China’s crude and finished steels output, in the first half (H1) of CY’21, stimulated by strong demand and price, increased y-o-y. According to data, in H1CY’21, crude steel output increased 11.8% y-o-y, especially in the first quarter (Q1, Jan-Mar’21). In Q1, the y-o-y growth exceeded 15%.
However, on entering Q3, China’s crude and finished steels production decreased sharply, mainly because of the gradual increase in production restrictions. In fact, crude steel production in July fell 8.4% y-o-y, in August by 13.2%, in September by 21.2%, and in October by 23.3%. As can be seen, the rate of decline has continued to expand.
It is worth noting that although China’s crude and finished steels output rate dropped sharply in H2 of the current year, and even showed negative growth, the national-level output will still be relatively high in CY’21, as per Lange Steel. According to data, from Jan-Oct’21, national crude steel output was 877 million tonnes (mn t), a y-o-y decrease of 0.7%.* It is estimated that in CY’21, crude steel output will be about 1 billion tonnes (bn t), and finished steel will reach 1.3 bn t.
Inventory
It should be pointed out that China’s steel inventory level will be relatively stable in CY’21. Data from Lange Iron and Steel Network show that as of the end-Oct’21, the social (retail and warehouse-level) stock of five major types of steel in 29 cities was at 10.628 mn t, a decrease of 1.01 mn t over the same period last year, and a y-o-y decrease of 8.7%. In the same period, the China Iron and Steel Association’s (CISA’s) statistics on the steel inventory of key steel companies nationwide was 12.845 mn t, an increase of 700,000 tonnes or 5.7% y-o-y. With the decline in social inventory, the overall inventory still showed a slight decline. This shows that since the beginning of this year, crude steel and finished steel production has been absorbed by downstream industries (both domestic and overseas).
Imports
While domestic production has gradually weakened, imports demand has also dropped from the strong growth seen in the previous year. According to statistics from the General Administration of Customs, the country imported 11.84 mn t of steel from Jan-Oct’21, a y-o-y decrease of 30.3%. Especially after entering Q3, steel imports fell sharply – showing a drop of 59.7% y-o-y in July, 52.5% y-o-y in August, 56.5% y-o-y in September, and 41.6% y-o-y in October.
The main reason why China’s steel imports are weak and sluggish this year is that the international steel markets had raised prices, rendering importers unprofitable. As domestic steel prices are far below international levels, a negative growth in steel imports in CY’21 is a foregone conclusion. It is estimated that annual steel imports will hardly exceed 16 mn t, a drop of more than 30% from the previous year.
*correction: China’s Jan-Oct crude steel output was earlier written as 87 mn t which has been corrected.
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