With improving economy and increasing infrastructure investments in the country, China is going to propel global steel demand in coming times.
Credit Suisse analysts revealed that worldwide steel demand will increase with the improvement in economic conditions in China, which is the largest consumer of steel in the world, as reported by Forbes.
According to the government data, production of crude steel in China declined marginally in March 2009 from the previous year. Nonetheless, output kept constantly running up at a higher rate, regardless of excess supply affecting the domestic prices.
Presently, 35% of the global steel demand comes from China. Moreover, its economy is improving in lines with infrastructure investment and loans, currently growing at a rate of 27% per annum. There is continuous rise in sales of new homes. Also, China Purchasing Manager’s Index (PMI) is hovering over 50% for the second month in succession. And believing the predictions of economists, Chinese economy is expected to observe an 8% GDP growth in 2009.
Earlier in 2008, steel demand plummeted as the worldwide economic turmoil affected most of the important customers from construction, industrial equipment and automotive sectors. In the recent months, majority of steel companies have brought drastic reductions in their production, and prices have plunged from the record levels in mid-2008.
Before the world slipped into the recession, China was playing a major role in boosting the global demand. Now, a big portion of steel is trading below cash cost and still higher production cuts are quite certain so as to establish a balance between the falling demand and supply. Outside China, which is the leading steel producer in the world, production has been noticed 37% down on a YOY basis; rather it has dipped to its lowest mark since 1967.
According to a Research Analyst at RNCOS, “The worldwide investors are suspecting the potentials of the Chinese steel industry due to rising concerns that increased export subsidies in China would weaken the steel prices all across the world, in wake of anticipated rise in Chinese demand. Additionally, it’s much lower if growth of real investment in China will go up in 2009. However, China is apparently no more a net steel exporter.”
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