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China battles steel supply-demand imbalance, industry chief says

China is facing a significant imbalance between supply and demand in its steel market, the head of state-backed China Iron and Steel Association (CISA) said in comments reported by China Metallurgical News on Monday.

Despite China’s efforts to control capacity expansion and encourage industry concentration, these initiatives have not yielded significant results, said CISA President Yao Lin.

Compounding the problem, some companies continue to ramp up production and compete by slashing prices, initiating a vicious cycle of competition that disrupts market balances, Yao said.

This has resulted in a consistent decline in the industry’s revenue over the past few years, Yao said.

China, the world’s largest steel producer, manufactured 1.005 billion metric tons of crude steel last year, according to data from the National Bureau of Statistics. Analysts predict 2024 will be the final year of crude steel output exceeding 1 billion tons.

The downtrend from a peak of 1.065 billion tons in 2020 can be attributed to shrinking demand due to a prolonged downturn in the steel-intensive property sector and Beijing’s mandate for zero annual growth in output from 2021, aimed at limiting carbon emissions.

Meanwhile, steel consumption in the world’s second largest economy was expected to drop 4.4% to 863 million tons in 2024, according to state-backed research house China Metallurgical Industry Planning and Research Institute.

With domestic demand down, China’s steel exports in 2024 hit the highest level since 2015, at 110.72 million tons, inflaming global trade tensions as producers in Japan, India and elsewhere argued that a flood of cheap Chinese steel products was hurting local manufacturers.
For December alone, output climbed 12.6% from a year earlier to 75.97 million tons.

The most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE) TIO1!, a key steelmaking raw material, closed morning trade at 799.5 yuan ($109.29) per metric ton on Monday, as traders balance the easing supply concerns and lagging steel demand against improving market sentiment in China.
Source: Reuters

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