heel interessant, zeker voor de Toekomstbeeld en een steuntje in de rug ;-) Misschien al gelezen of gezien maar ik plaats het toch maar.
Jim Lennon, managing director, Red Door Research, analyses latest ramifications of China’s steel output
The past year has seen some surprising developments in Chinese steel. The pessimism that existed at the start of 2016 proved to be misplaced. Steel production and consumption rose year-on-year in 2016, compared with expectations of big falls at the start of the year.
Sectors that surprised on the upside in 2016 included housing, autos and infrastructure.
What has been truly astounding is that in the first four months of 2017, reported crude steel production rose by just under 5% year-on-year. Owing to exports falling 26% year-on-year over the same period, Chinese apparent steel consumption rose by more than 10% year-on-year in the first four months of the year.
So far this year, housing has remained stronger than expected as a source for steel demand and a slowdown in infrastructure spending is still in the future.
In April alone, crude steel production rose to a new all-time high of 886 million tpy (annualised) and apparent demand also reached a record high (see chart below left).
Both these developments seem to go against weakening macro-data for April, but indications are that May output could be even higher.
Following recent falls in raw materials prices, steel mill margins have improved and mills continue to churn out steel without any sign of major inventory build. Fears of a strong macro-slowdown in China seems to be overdone – at least for the short term.
Recent forecasts from the World Steel Association (Worldsteel) for Chinese steel demand were for flat demand in 2017 (following 1.30% growth in 2016) and a decline of 2% in 2018.
The latest numbers suggest that 2017 could grow by 3-4%, even assuming a significant slowdown in steel-using sectors as the year progresses.
As the 2016/early-2017 fiscal and monetary stimulus is slowly unwound through 2017, it remains possible that 2018 will be a negative year for Chinese steel growth, as suggested by the Worldsteel forecasts.
Until these latest numbers emerged, the prevailing wisdom had been that the absolute peak in Chinese steel demand was achieved in 2013. On an annual basis this is probably still true, but the second quarter of 2017 could surpass any previous quarters in history.
While 2017 demand will be lower than in 2013, it is likely that crude steel production could hit an annual high in 2017 as a whole (exports will be higher than in 2013), surpassing the 822 million tonnes achieved in 2013.
Following crude steel capacity closures of around 50 million tpy in 2016 (some say up to 90 million tpy including scrap-based induction furnaces, which were forced to close in the fourth quarter of 2016) and a further 50 million tpy of closures this year, the degree of over-capacity in the industry has been markedly reduced.
The Chinese government looks likely easily to achieve its target of closing 150 million tpy of capacity between 2016 and 2020.
Nameplate crude steel capacity is reported to be 1.10-1.20 billion tpy, but effective (operated) capacity is now probably around 950-975 million tpy and April 2017 effective capacity utilisation on this basis was more than 90%.
This is not to say that over-capacity no longer remains a challenge for the global steel industry, but a year of strong demand and significant closures has certainly changed the picture to a more positive one from a Chinese perspective.
The recent collapse in iron ore prices, from more than $90 per tonne cfr to $60 per tonne recently, appears not to have been driven by a fall in demand, but rather by the perception that demand had peaked (actually not yet confirmed) and that supply growth for iron ore would accelerate in the coming months.
Given the high degree of speculative activity on the Dalian iron ore exchange, prices appear to be driven more by sentiment now than actual short-term supply/demand.
For global markets, the direction of Chinese steel exports remains important. As mentioned, exports of finished steel fell 26% year-on-year in January to April and in April alone were down 28.50% year-on-year.
Exports peaked in 2015 at 112 million tonnes and fell to 109 million tonnes in 2016 – the annualised rate of exports so far in 2017 is only 82 million tpy.
For the year as a whole, exports may rise from the current rate, but are still likely to be lower year-on-year, supporting non-Chinese production and steel prices to an extent.
Globally, China is still the biggest steel-exporting country by a significant margin. Exports, at 109 million tonnes last year, were well ahead of Japan, at 41 million tonnes, and both Russia and South Korea at 31 million tonnes.
Exports as a percentage of steel production remain relatively low for China, at 10-15% in 2016-17, while of the top five exporting countries, Germany exports more than two thirds of its steel production, and South Korea and Russia both export nearly half of their output.
Chinese steel exports are increasingly being concentrated within Asia. Total Chinese steel exports last year declined to every region except Asia, led by double-digit declines to North America, South America and Europe.
Exports to other Asian countries, by contrast, rose by 5% year-on-year, with nine of the top ten export destination countries for Chinese steel being in the region.
China’s steel exports to the USA, meanwhile, were a mere 1.20 million tonnes, down by more than 50% from 2015, mainly due to large anti-dumping tariffs that have been imposed on Chinese steel imports.
Slowing Chinese exports reflect better demand and margins for domestic sales as well as the result of growing protectionist measures against imports from China.
As the chart above shows, US steel consumers have consistently paid substantial premiums for steel compared with Chinese consumers. From 2014 to 2016, on average US hot rolled coil steel prices were 60% more than those paid by domestic Chinese consumers.
In April 2017, US prices were 80% higher.
How high could US prices go if further protectionist measures are applied?