The Coal Trader

China 2023 Steel Output to Rise

CHINA’S steel output is expected to rise for the first year in three in 2023 as a soft domestic property sector is compensated by strong vehicle manufacturing and rising exports. The country, which makes about 55% of the world’s steel, produced 874.7 million tonnes in the first 10 months of the year, up 1.4% from the same period in 2022, according to official data.

Property construction accounts for about 35% of China’s steel demand and the sector has been plagued this year by major developers experiencing liquidity crunches and falling sales, with sales by floor area declining 7.8% in the first 10 months of the year from the same period in 2022.However, hopes of a revival in coming months have been sparked by Beijing’s moves to stimulate the sector by easing lending requirements, with sentiment further buoyed by a slight rise in new home prices in November, the third straight monthly gain.

But it’s outside of property that steel has performed better in 2023, with China’s automobile production hitting a record high in November of 3.093 million units, up 7% from October and 29% from November last year. Industrial output rose 4.6% year-on-year in October, the strongest gain since April and an acceleration from the 4.5% pace in September, while infrastructure investment climbed 5.9% in the first 10 months of the year from the same period in 2022. Machinery, infrastructure and vehicles account for just under 50% of China’s steel demand, and these sectors are all showing solid growth.

China is also exporting more steel products, with shipments in the first 11 months of the year totalling 82.66 million tonnes, up 35.6%, or 20.71 million tonnes, from the same period last year. It’s also likely that Beijing has been willing to see steel mills boost overall production in 2023 from 2022 levels as it helps lift economic growth, which has been struggling to gain momentum since China ended its strict zero-Covid-19 policy at the end of last year.

Steel prices have also recovered in recent weeks, with rebar futures in Shanghai ending at 4,037 yuan a tonne on Monday. This is below the recent closing peak of 4,069 yuan a tonne on Nov. 21, but also 11.4% higher than the recent five-month low of 3,632 yuan on Oct 23.

Rebar inventories, as monitored by consultants SteelHome, dropped to 3.49 million tonnes in the week to Dec 8 from 3.55 million previously. Rebar stockpiles usually drop heading into the northern winter, but the current level is below the 3.65 million from the same week in 2022 and the 4.20 million in 2021. This suggests that steel mills may have room to increase output early in the new year, especially if they expect the property sector to continue its so far tentative turnaround.