The volume of steel production in China in 2020 will reach 1 billion tons

The dynamics of supply and demand in the Chinese steel market is likely to be on the rise in the second half of 2020, as its expansion of steel capacity has slowed, while demand for infrastructure and construction is weakening due to weaker credit policy. As a result, S&P Global Platts maintains its 2020 forecast that China’s iron and steel production will increase by about 1.7% and 2%, respectively, year on year.

Steel production will reach 1,016 million tonnes in 2020, up from 996 million tonnes in 2019.

The National Bureau of Statistics of China revised the volume of pig iron production in January-May 2019 to 351 million tons from preliminary data of 335 million tons. Based on this trend, Platts expects China’s pig iron production in 2019 to be revised to 846 million tonnes from the previously reported 809 million tonnes. Thus, the production of pig iron in 2020 may amount to about 860 million tons.

The growth in production in China is largely due to the capacity replacement program. Platts estimates that iron and steel production capacity reached 1.026 billion tonnes per annum and 1.227 billion tonnes per year, respectively, up about 4 million tonnes per year from the end of 2019.

The net increase in capacity in 2020 has slowed since 2019, when capacity has increased by 23 million tonnes per year for pig iron and 42 million tonnes per year for steel from 2018.

This is due to the fact that most of the old capacity replaced in 2019 was suspended or closed until 2019, as a result of which the newly commissioned facilities in 2019 actually increased the net capacity. However, most of the replaced facilities in 2020 are still operational before new facilities are commissioned.

Moreover, some projects scheduled for commissioning in the first half of the year have been postponed. These projects have a total crude steel production capacity of 9.6 million tons per year for pig iron and 13 million tons per year for crude steel.

The delay in commissioning is due in part to the COVID-19 pandemic, which disrupted construction in early 2020, and because some steelmakers deliberately slowed down construction or commissioning to avoid hitting the market by appearing on the market. too much new capacity, market sources said.

In the second half of the year, it is planned to commission 61 million tons per year of new pig iron and 83 million tons per year of new crude steel production capacity, including deferred projects. Platts estimates that while the new capacity will replace old ones, this year net capacity will be increased by 4 million tonnes per year for pig iron and 9 million tonnes per year for crude steel.

Most of the new projects are expected to be operational at the end of 2020, and some may be delayed until 2021. Therefore, further expansion of capacity in the second half of the year will be limited, which will contribute little to the overall production of iron and steel in China in 2020.

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