Steel production is favorable to spring market

In 2019, although China’s steel demand of cold rolled steel pipe has increased a lot, steel production growth is more robust, resulting in heavy market pressure.It is worth noting that this year of higher steel production growth is likely to come to an end. New statistics show that in October 2019, China’s crude steel output was 81.52 million tons, down 0.6 percent year on year; Pig iron output was 65.58 million tons, down 2.7% year on year. Steel output was 102.64 million tons, up 3.5% year on year; This is a big change from the 8.4 per cent, 6.3 per cent and 10.6 per cent increases in the first nine months of the year, and may indicate a sharp slowdown in the growth of steel and steel production in the future. Based on this recalculation, it is estimated that the growth rate of crude steel production in China will be around 3% in 2020, which will be significantly lower than the growth rate of around 6% (predicted value) in 2019.

The reason why China’s steel and steel production growth will become a “spent end” in the future is mainly based on three considerations: The first is the increase in the base of comparison. According to the current statistics, the national output of mild steel tube will be close to or more than 1 billion tons in 2019, with an increase rate of about 6%. Such a high base of comparison makes every one percentage point increase in crude steel production in the New Year, which needs more absolute support. Therefore, if there are no big surprises, the significant decline in the growth rate of steel and steel production in 2020 will be a high probability event. Second, new advanced capacity reduction. Capacity is the basis of production, and strong growth in steel output over the years sometimes means an expansion of the steel capacity base. In recent years, through capacity replacement and large-scale investment, China has added a lot of advanced steel production capacity. 2019 will be the year when these advanced production capacity of hot dipped galvanized steel pipe is released. It is expected that the completion and production of advanced production capacity will come to an end after that, thus slowing down the growth of steel and steel production.

After that, capacity utilization increases and space decreases. With the capacity base unchanged, the improvement of capacity utilization of round steel pipe will also stimulate the production growth. In 2019, China’s crude steel production increased significantly and continued to accelerate, an important reason is that various factors has greatly improved. Statistics show that in the first three quarters of 2019, capacity utilization in the steel industry increased by nearly 2 percentage points year on year. In fact, the utilization rate of China’s steel production capacity should have exceeded 80% by 2019, reaching a reasonable level, and the space for further improvement is limited.