China’s top steelmakers see strong demand in 2021, but slow shift to carbon neutrality
- Chinese steel producers remain bullish about domestic demand this year, but have expressed concern about high iron ore prices
- The transition to greener methods of production is likely to take a back seat to consolidation of steel mills, steel producers say
Demand for steel in China will remain buoyant this year amid a steady pipeline of infrastructure projects, while long-term plans to curb production to meet carbon emissions targets are expected to proceed slowly, Chinese steel producers say.
Ahead of the National People’s Congress in Beijing on Friday, congress deputies and heads of some of the biggest steel mills in China, including Hunan Valin Iron and Steel Group and Xinyu Iron & Steel, said a decline in output to curb pollution was unlikely to kick in quickly, according to an interview with the state-backed China Economic Times.
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The high prices saw the Chinese steel industry call a meeting with Anglo-Australian iron ore miners Rio Tinto and BHP late last year.
“On the one hand, the price of raw materials has been strong – the price of iron ore has been around US$170 per ton since the start of the year – but on the other, demand for steel remains strong,” Xia Wenyong, chairman for Xinyu Iron & Steel, said in the interview on Thursday.
“Downstream customers have very full export orders with a large number of mechanical and electrical and home appliances due to be exported.”
With 2021 being the first year of China’s new 14th five-year plan, Xia said demand for steel this year could exceed last year’s especially with many local governments pitching strong growth plans that would stimulate demand.
At the National People’s Congress, the government only moderately cut local special purpose bonds used to fund infrastructure spending, indicating its intention for ongoing economic stimulus.
Demand for mid- to high-end steel products would be strong, but construction materials used in real estate development could be subdued, especially since the government has been reining in speculative property sales by curbing easy credit, Xia said.
The manufacturing sector – particularly cars, home appliance and equipment production – will also grow and boost demand for steel, said Li Lijian, chairman of Anyang Iron & Steel.
The recovery of the global economy will also deepen demand for Chinese steel, said Shandong Iron & Steel Group chief executive Hou Jun, who expects the rebound to speed up in the second half of the year following Covid-19 vaccinations.
Strong demand for Chinese steel meant more imports of foreign steel were likely, although this would be a last resort and need to be handled carefully, He Wenbo, chairman of the China Iron and Steel Association, told state-owned China Metallurgical News.
This year, the consolidation process of steel companies will fire up with efforts becoming more pronounced,
“While expanding imports could meet domestic market demand, we must also prevent unfair competition to domestic steel mills,” he said.
He hinted at the idea of establishing a foreign iron ore and steel resource development group to manage imports.
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“In 2021, we expect mergers and consolidations of steel mills will accelerate, further concentrating production capacity,” said Hou, from Shandong Iron & Steel.
“This year, the consolidation process of steel companies will fire up with efforts becoming more pronounced,” added Li, from Anyang Iron & Steel.
China kept its consolidation pace up when China Baowu Steel Group, the country’s largest steelmaker, acquired a 90 per cent stake of state-owned Kunming Iron & Steel Holding in the southwestern province of Yunnan last month.
The Chinese government is looking to concentrate 60 per cent of the steel production within the nation’s top 10 steel producers by 2025 to increase efficiency.
Wang Shuhua, chairman of Jinan Iron and Steel Group, said consolidations would also help the government hit its green targets as they tend to lower excess output. But to expedite meeting those targets, the government would need to lift innovation in low-carbon production schemes, he added.
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“There is a gap between technological innovation capabilities and the demand for those technologies and the key technologies to promote green production are still not very mature,” said Cao Zhiqiang, chairman of Hunan Valin Iron and Steel Group.
The road to successful carbon emissions reduction would be an arduous one particularly in the next 10 years, said Zhang Wuzong, from Shandong Shiheng Special Steel.
Steel mills, however, are pushing on as much as they can.
Anyang Iron and Steel said it launched a waste heating project last year that would reduce coal usage by 50,000 tons and carbon dioxide emissions by 106,400 tons per year. Xinyu Iron & Steel was investigating the use of rare earth minerals to power a high-quality steel-bar production line.
