September 25, 2013 / 3:47 AM / in 4 years

Baosteel says China steel use to peak in 2018

QINGDAO, China (Reuters) - China’s annual steel consumption is expected to peak at 825 million tonnes in 2018, Baoshan Iron and Steel (600019.SS) said, as demand growth runs out of steam.

Big iron ore suppliers such as Vale VALE5.SA, Rio Tinto (RIO.AX)(RIO.L) and BHP Billiton (BHP.AX)(BLT.L) have used sustained growth in appetite from Chinese steelmakers to justify their rapid expansion plans.

But representatives from the Chinese steel industry have repeatedly stressed that domestic demand is slowing and that an iron ore supply glut will drive down prices in the coming years.

Dai Zhihao, general manager of the company, also known as Baosteel, was speaking on Wednesday at an annual industry conference in the coastal city of Qingdao.

The company forecast earlier this year that steel consumption would stand at 698 million tonnes in 2013.

Wang Xiaoqi, the vice-chairman of the China Iron and Steel Association, told the same conference that he expected annual iron ore output from top miners to grow by 470 million tonnes over the 2013-2015 period, and that prices for the steelmaking ingredient would start to drop from 2014.

By the end of 2013, the three mining giants, along with Australia’s Fortescue Metals Group (FMG.AX), could already be producing nearly 1 billion tonnes of iron ore, according to Reuters calculations using global supply and demand data.

    Zhong Ziran, chief engineer with China’s Ministry of Land and Resources, told a conference earlier this year that domestic steel consumption was likely to peak before 2015 and plateau for the following decade, with annual iron ore demand expected to stabilise at around 900 million to 1 billion tonnes.

    According to CISA figures, apparent steel consumption in China reached 426.55 million tonnes in the first seven months of this year, up 6.4 percent on the year. The figure for the whole of 2012 was 687 million tonnes, Wang said.

    Baosteel’s Dai also told the conference that the industry still had to resolve the problem of setting iron ore prices, saying that it was relying on a small number of companies and transactions to determine index prices.

    Reporting by Ruby Lian and David Stanway; Editing by Ed Davies and Joseph Radford

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