China is on track to defy expectations and produce a record steel output this year of just shy of 1bn tons, according to the latest report from Alphabulk, part of AXS Marine. However, analysts and miners are warning dry bulk owners not to get too excited by this headline number.
Latest data from Beijing’s National Bureau of Statistics shows China produced 664.87m tons of steel in the January to August period, up 9%year-on-year. The growing volumes being produced are mainly for domestic consumption, as exports have not increased.
“On an annualized basis, the 664.87 million tons for the eight-month period is equivalent to a potential 997 million tons for the year, a figure which would be well ahead of the 927 million recorded for full-year 2018 and the first time output could come close to 1 billion tons,” Alphabulk noted.
Chinese steel futures hit a six-week high this week on hopes of more stimulus measures, after the latest economic data showed a deepening slowdown. China’s industrial production grew at the weakest pace in 17 years in August.
The record steel production is coming with less reliance on iron ore imports, however, something of enormous significance to the world’s capesize owners.
International shipowning association BIMCO has reported on the changing nature of Chinese iron ore demand, driven primarily by a switch to using scrap steel in steel production rather than imported iron ore, a change pushed for by the Chinese government.
The BIMCO point of view was backed up this week by BHP, one of the world’s largest iron ore miners, which forecast iron ore supply to slow in the coming years on the back of slowing demand from China.