China's steel demand could weaken next year as local industry faces the aftermath of a trade war with the United States.
According to the World Steel Association, steel demand in China will grow by just 1% to 909 million tonnes in 2020, well below the 7.8% growth forecast for 2019. Speaking to reporters on Monday at the association's annual general meeting in Mexico, CEO Edwin Basson said the protracted trade war has negatively impacted China's industry.
Despite declining demand, major Chinese steelmakers plan to continue to ramp up steel production as the government raises investment in infrastructure. The stimulus is aimed at supporting an economy facing obstacles from the trade war, but could also exacerbate the glut of the global steel market.
Steel production in China rose 9.3% in August to 87.25 million tonnes, representing 42 consecutive months of growth. Annual production is approaching a record 1 billion tonnes. Since the beginning of the trade war last year, the global steel market has faced a slowdown in demand and an increase in production in China. China has taken steps to reduce excess production since 2016, cutting capacity by 150 million tonnes over three years.
The increase in production volumes is not related to the trade war, said Hesteel Group Chairman Yu Yong, noting that this is a response to growing domestic demand. However, due to weakening domestic demand from automobile and industrial equipment manufacturing, surplus steel is starting to be exported overseas, undermining the Asian market. For example, the price of hot rolled coil - the benchmark for the East Asian export market - fell from $ 640 per tonne in October 2018 to $ 515, the lowest in 29 months.
