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As reported by Reuters, Chinese steel futures fell, as demand for steel in China could slow down during the winter as the economy cooled.
China’s industrial output, fixed-asset, retail sales and prices were lower than expected last month, raising concerns that a fall in real estate investment will lead to an increase in demand for steel.
Steel appetite also begins to fluctuate, as winter in the northern regions stops construction activities, and the government has limited industrial production in the campaign against air pollution.
Demand for steel is declining as construction activities are hit by cold weather and government measures regarding pollution.
According to analysts, despite the fall in steel prices, steelmakers still earn more than 1,000 Yuan per ton.
Nevertheless, manufacturers are trying to raise prices, losing profit due to rising prices for coking coal.
Features of China steel companies strategies
The steelmaking companies unanimously consider the coming year to be cool and successful, especially against the backdrop of the previous year’s crisis, with its falling prices for metal products and a decrease in domestic demand. Although the main industry problems persisted: protectionism in foreign markets is growing, and the domestic market remains one of the most unprotected in the world, 2016 for metallurgy was marked by a transition from recession to growth.
The redundancy of metallurgical capacities, estimated in billions of tons, remains the main problem for steelmakers around the world. According to the World Steel Association, the capacity utilization during the year fluctuated in the range of 70-74%. As a result, competition in regional markets continues to grow, leading to protectionist measures on the part of the respective states.
Nevertheless, most Chinese metallurgical companies managed to increase production volumes within a year and, using traditionally high profitability indicators for the industry, get positive financial results. Both internal and external factors became positive.
The key factor for the industry at the global level is the decision by China to shut down part of the facilities.
Steel exports from China are declining, while demand in key sales markets is growing, which certainly provides significant support for metal prices. As a result, real growth in world steel consumption at the end of the year, according to Worldsteel forecasts, will grow by 3-4%, while last year this figure was only 1.3%, and in 2015, there was a decline in 5.4%.
Upcoming changes: US steel industry outlook to 2017
The Chinese authorities announced their intention to close 800 million tons of inefficient coal-mining capacity by 2020, and according to forecasts for the fourth quarter of 2017, about 500 million tons will be withdrawn from the turnover in China.
Now there is a tendency of growth of imports of high-quality coking coal by consumers from China. Market data indicate that the volume of imports of coking coal in China in 2017 will reach a four-year high.
According to forecasts, the current plan will strengthen the market position through the expansion of the product line, as well as increase overall efficiency and competitiveness through increased production and sales of products with high added value.
In 2016, demand for industrial pipes will grow, primarily due to import substitution in such sectors as oil and gas, agricultural and nuclear engineering. The consumption of pipes in construction for the year is expected to be 4.1 million tons (an increase of 9% by 2016), which is linked by the state’s implementation of capital repair programs and preferential mortgage lending.
By 2017, the domestic market, most likely, will grow by 3%.