Metallurgical Industry Planning and Research Institute: The demand for steel in machinery, automobile, energy and other industries has grown against the trend, and the decline in steel demand is expected to narrow in 2024

21st Century Business Herald reporter Jiao Yifei reported from Beijing

Recently, the Metallurgical Industry Planning and Research Institute released the latest research results on steel demand forecasting in China and around the world. It is estimated that the steel consumption in the mainland will be 890 million tons in 2023, a year-on-year decrease of 3.3%, of which the steel demand in machinery, automobiles, energy, shipbuilding, home appliances and other industries is growing, and the steel demand in construction, hardware products, railways, steel and wood furniture, bicycles and motorcycles, containers and other industries is declining. In addition, it is expected that the year-on-year decline in mainland steel demand will narrow in 2024, with a total of 875 million tons.

Construction steel demand will continue to decline

As the main downstream demand market of the steel industry, the real estate industry will continue to bottom out in 2023, which will put great pressure on the steady growth of the steel industry.

Through a comprehensive analysis of the economic operation situation, investment scale, product output and many other aspects of the downstream industry, the Metallurgical Industry Planning and Research Institute expects that the national steel consumption demand in the construction industry will be about 506 million tons in 2023, a year-on-year decrease of 4.8%.

Xiao Bangguo, vice president of the Metallurgical Industry Planning and Research Institute, said that real estate, infrastructure and manufacturing are the most important steel-using industries in the mainland's steel industry, of which real estate accounts for the largest proportion. Recently, the real estate industry has entered a stage of deep adjustment, although the infrastructure and manufacturing industries have maintained a steady and increasing development trend, but it is difficult to make up for the decline, so the total amount of steel consumption will still show a downward trend. From the perspective of leading indicators, from January to November 2023, the funds in place for real estate development enterprises across the country decreased by 13.4% year-on-year, and the area of new housing construction decreased by 21.2% year-on-year, which is expected to drag down the demand for steel consumption in the field of housing construction.

"However, the decline next year will not be too large. Guan Zhijie, deputy chief engineer of the Metallurgical Industry Planning and Research Institute, said that the current central government has set the tone of "promoting the steady and healthy development of the real estate market", and at the same time, some measures taken by various localities to promote the steady development of real estate will bring new momentum to steel consumption in the real estate field.

With the adjustment of the mainland's current economic and industrial structure, the proportion of steel consumption in various fields has also changed. In particular, the demand for steel in machinery, automobiles, energy, shipbuilding, home appliances and other industries has shown a significant growth trend.

According to the forecast of the Metallurgical Industry Planning and Research Institute, in 2024, the machinery industry will be 173 million tons, a year-on-year increase of 0.6%. The automobile industry was 58.4 million tons, a year-on-year increase of 3.9%. the energy industry was 45.4 million tons, a year-on-year increase of 4.8%. The shipbuilding industry was 17.4 million tons, a year-on-year increase of 16%. The household appliance industry was 16.6 million tons, a year-on-year increase of 2.2%.

Chopin Guo said that with the effect of the policy of steady industrial growth, the promotion of new industrialization continues to deepen and solidify, and the high-end manufacturing industry represented by new energy such as photovoltaic and wind power, UHV power transmission and transformation, green manufacturing, and intelligent manufacturing will continue to drive the growth of manufacturing investment.

The total global steel demand is expected to increase next year

According to the analysis of global and regional economic development and steel demand, the Metallurgical Industry Planning and Research Institute predicts that the global steel consumption in 2023 will be 1.77 billion tons, a year-on-year decrease of 1.3%.

However, China's steel exports continued to run at a high level this year. Customs data show that in November, China exported 8.005 million tons of steel, a year-on-year increase of 43.2% and a month-on-month increase of 0.8%, jumping 8 million tons for the fourth time in a single month this year. From January to November, China exported 82.658 million tons of steel, a year-on-year increase of 35.6%.

Guan Zhijie pointed out that the main orientation of China's steel export policy is to curb the export of low-end products and encourage more high-end products to participate in international competition. However, considering the intensification of geopolitical tensions, the global economic and financial fragmentation will further slow down, which is not conducive to the further expansion of China's steel exports.

According to the forecast of the Metallurgical Industry Planning and Research Institute, the total global steel demand in 2024 will increase year-on-year in the context of the expected steady growth of the global economy. Among them, Asia is the only region where the proportion of steel consumption in the world has declined, down 0.64 percentage points to 69.72%, but the proportion of steel consumption still ranks first in the world. Europe, Africa, the Middle East, North America, the CIS, and South America will increase the proportion of consumption to varying degrees.

At the same time, the EU's Carbon Border Adjustment Mechanism (CBAM) has officially entered a transition period since October 1, and the transition period will end on December 31, 2025. The steel industry is one of the first industries to be covered by the CBAM, which will also have a certain impact on China's steel exports in the future.

Guan Zhijie said that at present, it is necessary to find out the contribution of China's steel industry to reduce emissions, calculate the cost of emission reduction in the steel industry, promote the establishment of a reasonable carbon pricing mechanism, and provide professional support for communication and negotiation on CBAM issues. Iron and steel enterprises should also plan in advance, accelerate the promotion of low-carbon development, comprehensively enhance low-carbon competitiveness, and do a good job in response.

The pace of industry adjustment and improvement is accelerating

Historically, the steel industry has been considered a cyclical industry. In the past two years, there has been a significant year-on-year decline in industry efficiency, and when the downward cycle will end has become a common concern in the industry.

"The steel industry is not a congenital cyclical industry, and the reason why it has shown cyclicality in the past is caused by the 'cyclicality' driven by downstream demand and investment. Fan Tiejun, deputy secretary of the Party Committee and president of the Metallurgical Industry Planning and Research Institute, analyzed that in the future on the demand side, the intensity of fixed asset investment such as real estate and infrastructure that affects steel demand will weaken, and the way of economic growth will increase from quantity to quality, and the downstream industrial structure will continue to adjust, and the steel market demand will change significantly. On the supply side, the crude steel supply capacity of the steel industry and the production capacity of steel products are still at historical highs.

Fan Tiejun further pointed out that the steel industry is gradually entering a period of deep adjustment, the overall development situation of "large supply elasticity and slow recovery of demand", the contradiction between supply and demand in total volume and structure will last for a long time, superimposed "high raw material prices shock, low steel prices operation", the focus of industry adjustment will focus more on structural optimization and quality improvement.

In addition, the Metallurgical Industry Planning and Research Institute has also released the competitiveness (and development quality) rating of China's iron and steel enterprises. 107 iron and steel enterprises entered the scope of this assessment, of which 18 were rated A+ in competitiveness (and development quality), that is, extremely strong, and the total crude steel output accounted for 52.5% of the country's total output.

It is worth noting that in the report released by the Metallurgical Industry Planning and Research Institute last year, there were 109 participating enterprises, and the decline in the number of participating enterprises this year is due to the fact that some enterprises have participated in the restructuring and no longer participate in the evaluation alone.

"Although the total number of participating enterprises has declined, the total crude steel output has increased compared with last year. Fan Tiejun believes that it is the right time to speed up the adjustment of the industrial structure, and the concentration of the mainland steel industry needs to be further improved. In 2022, the crude steel output of the top 10 domestic steel enterprises will account for 42.8% of the country, but there is still a large gap compared with countries such as Japan and South Korea.

Recently, the merger and reorganization of the steel industry has also made a lot of new progress. On December 8, Baosteel Co., Ltd. announced that Baosteel Co., Ltd. intends to acquire 48.6139% of the equity of Shandong Iron and Steel Rizhao held by Shandong Iron and Steel Group for 10.703 billion yuan in cash. On December 15, the new "Nanjing Iron and Steel Group Co., Ltd." was inaugurated, marking the change of the actual controller of Nanjing Iron and Steel Co., Ltd., a listed company of Nanjing Iron and Steel Group, to CITIC Group. It is understood that after the strong alliance with CITIC Pacific Special Steel, a subsidiary of CITIC Group, Nanjing Iron and Steel will form a 30 million ton specialized special steel aircraft carrier, achieving the world's first special steel production scale and market share.

Fan Tiejun said that with the further improvement of industry concentration, we will achieve obvious breakthroughs in the right to speak on foreign procurement of raw materials, the formulation of future industry rules, and the research and development of original green and low-carbon technologies.

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