China's steel industry is expected to continue to grow in 2021 as the global supply shortage increases its exports and Beijing continues to support its housing and manufacturing sectors.
If nothing extraordinary happens, then China has time to produce 1.05 billion tons of steel in 2020. Steel production in China is likely to rise to 1.1 billion tonnes in 2021 to meet demand from export and domestic manufacturing and construction projects, backed by government stimulus measures, according to market participants.
Construction demand in China is likely to stall by early January, but traders restocking in January-February to an annual peak should partially fill the gap in demand for long products and in production, exports are expected to soften the flat steel markets. Some factories sold out their monthly HRC export quotas in early 2021. Cold rolled steel in some mills is fully reserved until February as strong demand for cars and home appliances is expected to continue to grow in 2021.
Higher raw material costs have not affected the mills' profitability since September, when gross margins were RMB 400-500 /t ($ 61-76 /t) for HRC and RMB 200 /t for rebar in early December. Marine iron ore prices rose to a seven-year high on limited supplies from Brazil, while metallurgical coal and coke prices rose sharply due to China's unofficial ban on Australian coal imports.
China plans to export over 50 million tonnes of finished steel in 2020, down about 18% from 2019 levels. The local association of iron and steel producers expects these exports to increase in 2021, but growth will be constrained by the global pandemic, which is not yet fully controlled, and existing trade protection measures, the report said.
