December 12, 2019 / 2:14 AM / 2 months ago

UPDATE 3-China's 2020 crude steel output expected to drop - govt research body

    * 2019 crude steel output seen hitting record high 
    * Steel demand to rise 7.3% in 2019, to drop 0.6% in 2020
    * Iron ore demand seen falling 3.1% in 2020, rising 3.8% in
2019

 (Adds quotes, breakdown on steel demand)
    By Min Zhang and Shivani Singh
    BEIJING, Dec 12 (Reuters) - China's crude steel output in
2020 is expected to ease from a record high this year to 981
million tonnes, a government consultancy said on Thursday.
   The 2019 output for the world's top steel producer is seen at
988 million tonnes, according to Li Xinchuang, president of the
China Metallurgical Industry Planning and Research Institute.
    In the first 10 months of the year, China has churned out
829.22 million tonnes of crude steel, up 7.4% from a year
earlier.
  Meanwhile, demand is seen rising 7.3% to 886 million tonnes in
2019, but was expected to drop from that level by 0.6% in 2020,
a report released by the research body showed.   
    "Steel consumption in 2019 is better than expected mainly
due to rapidly growing infrastructure investment and real estate
development, while industrial production is also generally
stable," Li said.
    Demand for steel in the construction industry is expected to
rise 11.2% this year to 478 million tonnes, but is seen slipping
0.6% in 2020. 
    Following is a breakdown of steel demand outlook for 2019
and 2020 by industry:

 Sector           2019   %       2020   %
                         change         change
                         y/y            y/y
 Construction     478    11.2    475    -0.6
 Machinery        142    1.4     142    0
 Automobile       50     -7.4    48.2   -3.6
 Energy           34     3.0     34.5   1.5
 Shipbuilding     11.3   3.7     10     -11.5
 Home Appliances  13.5   8.0     14     3.7
 Railway          5.4    5.9     5.5    1.9
 Container        4.9    -29.0   5.0    2.0
 * Measured in million tonnes
    
    Li called for further "large-scale consolidation" in the
world's largest steel market, while pointing to China Baowu
Group taking a stake in Maanshan Iron & Steel. 

    Baowu Group and Shougang Group recently swapped shares in
their listed arms.
    Meanwhile, a rapid growth in output this year has stoked
worries about China's years of efforts to cut over-capacity,
leading to a joint probe on production capacity at its steel
mills by the National Development and Reform Commission and
other government entities in November. 
    Some steel mills are producing more than their total
capacity, which remained an issue, Li said. "It is not
scientific, not sustainable, and not in line with environmental
requirements." 
    The research body expects iron ore demand in China to reach
1.225 billion tonnes in 2020 and 1.264 billion tonnes in 2019.
China brought in 1.06 billion tonnes of iron ore last year.

    China's pig iron output is expected to contract to 775
million tonnes in 2020 from 800 million forecasted for 2019.
       

 (Reporting by Min Zhang and Shivani Singh in Beijing; Editing
by Muralikumar Anantharaman and Arun Koyyur)
  
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