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What would fuel China’s steel market moving forward?

Moderate manufacturing and banking more on exports might be the answers

China fulfilled its promise for fresher air at the Winter Olympics. Steel mills in northern China’s Hebei, Shanxi, Henan, Shandong province, as well as Tianjin municipality, have reportedly been directed by the central government to keep their crude steel output from 1 January – 15 March 2022 at 30 per cent lower than in the same period of 2021. Now that the games have concluded, where does that leave China’s steel market?

Manufacturing and export
As the top steel producing country, the alloy is one of the most important commodities for China. Variants are used in housing, transportation, industrial, automobile, infrastructure and utilities sectors. It is one of the world’s most versatile materials – easily reused and recycled. However, the republic  may need to re-allocate its inventory while aligning with the government’s policy on carbon emissions.

Building is one sector all can conveniently anticipate a grim outlook this year, given it was the hardest hit last year after an ordered controlled (steel) output which hiked prices. Nevertheless, the Winter Olympics illustrated China’s living up to its promise of cleaner air by converting one decommissioned steel mill into a ski jump. Whether it would become another white elephant is a story for another day.

With decarbonisation goals taking precedence, moderated manufacturing and export might be the only remedies now. Industry sources expressed apprehension of a sluggish domestic demand just like in 2021; Chinese household incomes were unlikely to boost consumption, as overseas manufacturing plants resume their production. Dutch analyst ING’s findings revealed both the manufacturing and construction sectors in United States concluded 2021 with strong output and healthy-looking order books. This should provide a decent platform for growth in 2022.

China cannot totally halt its steel production, but it has electric arc furnaces (EAF) to gamble on. EAFs are deemed emission friendlier than the typical blast furnaces as they mostly consume ferrous scrap, involving a much lower carbon emitting process. In other words, the manufacturing route is fairly feasible. Lastly, China’s exports of major steel products continued to post year-on-year increases in April, with South Korea identified its biggest buyer. It should be able to remain safe with these routes.

Marine Online News Team
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