Affected by many factors, China’s total steel market demand will grow steadily in 2023, and the demand structure is significantly stronger than domestic demand. Steel production capacity continues to be released, which will drive a significant increase in iron ore imports and domestic production; steel and smelting materials Social inventories remain low.
1. The total demand for steel products is growing steadily
In 2023, most of the main related indicators of China’s steel market will show a growth trend. According to statistics, GDP will grow by 5.2% year-on-year in the first three quarters of 2023, and the full-year GDP growth is expected to be above 5%.
From January to October 2023, the added value of industries above designated size nationwide increased by 4.1% year-on-year, and the annual growth rate is expected to be no less than 4%. In industrial production, the year-on-year growth rate of the equipment remanufacturing industry, which consumes extremely high strength steel, exceeds the overall industrial growth rate. Among important steel-consuming industries, the national automobile output from January to October 2023 was 23.663 million units, a year-on-year increase of 4.9%. The national automobile industry is expected to exceed expectations in 2023, with total sales expected to reach 29 million vehicles, a record high. According to statistics from the China Shipbuilding Industry Association, the national shipbuilding completion volume from January to October 2023 was 34.56 million deadweight tons, a year-on-year increase of 12%. It is expected that China’s steel ship completion volume will also hit a record high in 2023.
In 2023, China will continue to introduce measures to stabilize growth, and they will be effective one after another, resulting in the growth of fixed asset investment across the country remaining unchanged. According to statistics, from January to October 2023, national fixed asset investment (excluding rural households) increased by 2.9% year-on-year, of which infrastructure investment increased by 5.9% year-on-year. Taking into account the acceleration of month-on-month growth, it is expected that fixed asset investment throughout the year will reach 3%. Among fixed asset investments, real estate investment continued to be weak, with a year-on-year decrease of 9.3% in the first 10 months, thus becoming the biggest drag on the growth of steel demand throughout the year.
Based on this calculation, the country’s total steel demand (including exports, the same below) will increase by more than 3% in 2023 compared with the previous year.
2. Steel export momentum is very strong
In China’s total steel demand structure in 2023, export momentum is very strong. According to statistics, the national steel export volume from January to October 2023 was 74.732 million tons, a year-on-year increase of 34.8%. The annual steel export volume is expected to be about 90 million tons, an increase of 30% over the previous year.
Not only that, China’s indirect steel exports will also increase significantly in 2023. According to statistics, in the first 10 months of this year, the export value of my country’s mechanical and electrical products increased by 2.8% year-on-year, accounting for 58.5% of the total export value. Among them, automobile exports increased by 88.5% year-on-year.
There are two main factors for the strong growth of China’s steel exports in 2023: First, the output of the world’s major steel-producing countries has shrunk, among which the crude steel output of the European Union (27 countries) fell by 7.1% from January to October, and the substitution function of China’s steel products has increased; Second, China’s steel products have relatively low prices and have competitive advantages. The depreciation of the RMB exchange rate against the US dollar over a period of time has enhanced this price competitive advantage.
China’s large exports of steel and steel-consuming products in 2023 have become an important engine for the steady growth of China’s total steel demand, completely offsetting the negative impact of shrinking demand in related fields caused by the decline in domestic real estate investment.
3. The release of steel production capacity has driven a substantial increase in iron ore resources.
The steady growth of total steel demand, coupled with the substantial increase in profits from steel products, provides a friendly environment for the release of domestic steel production capacity. Data from the National Bureau of Statistics show that from January to October 2023, the national ferrous metal smelting and rolling processing industry achieved a total profit of 26.67 billion yuan, a year-on-year increase of 37%. The release of domestic steel production capacity has also stimulated a substantial increase in smelting raw materials such as iron ore. According to statistics, from January to October 2013, the country imported 975.842 million tons of iron ore and its concentrate, a year-on-year increase of 6.5%. During the same period, domestic iron ore production also increased significantly, far exceeding the increase in iron ore imports. Stimulated by the release of domestic steel production capacity and higher prices, it is expected that the high-level growth trend of new iron ore resources throughout the year will not change.
4. Social inventory levels remain low
Affected by factors such as the steady growth of total demand, the suppression of production capacity release, and the “fast in and fast out” business strategy of traders, social inventory levels will not be high in 2023 and will be at a relatively low level. According to monitoring data from Lange Steel Network, the national steel social inventory index was 8.342 million tons on November 24, 2023, which has dropped for 7 consecutive weeks and is only 4.8% higher than the same period last year; according to statistics from the China Iron and Steel Industry Association, in mid-November 2023 The steel inventory of key steel companies across the country is 15.3299 million tons, a decrease of 11.4% compared with the same period last year. (Original article by Ruixiang expert, please indicate the source when reprinting)
