China’s record steel shipments will shrink next year as overseas demand slows and global trade friction increases, according to the China Metallurgical Industry Planning and Research Institute.
Net exports from the producer of half the world’s steel are set to contract 8 percent to 90 million metric tons from an estimated 98 million tons this year, Li Xinchuang, president at the institute, said in a briefing in Beijing. The country’s crude steel output will probably drop 3 percent to 781 million tons from 806 million tons in 2015, the institute estimates.
China’s mills are battling losses, oversupply and sinking prices as local consumption declines for the first time in a generation. The fallout is hurting iron ore prices and boosting trade tensions as mills seek to sell their surplus overseas. Shipments are up 25 percent this year and are compounding a global surplus that will probably last for years, according to Standard & Poor’s Ratings Services. India, one of the countries facing the surge, has pledged to step up import curbs.
"Exports will have a hard time growing or even matching this year’s level because of trade disputes and softening demand in many markets," Li said in a phone interview on Monday. "Domestically, traditional industries are still destocking, reducing capacity while investment and consumption are insufficient."
Construction Use
Consumption of steel products will slide 3 percent to 648 million tons in 2016 from 668 million tons this year, according to the planning institute. Demand from the construction industry, the biggest user of steel, will probably contract 7.2 percent this year to 360 million tons and decline further to 350 million tons in 2016, it said.
Steel producers globally have been protesting against the rising tide of cheaper supplies from China and sought protectionist measures from governments. India will step up constraints before the year-end, according to Steel Secretary Aruna Sundararajan last week.
China is ready to pull the plug on more loss-making plants as an expanding service economy and aging workforce ease the restructuring of heavy industry, Goldman Sachs Group Inc. said in a note dated Dec. 6. A price slump and deepening oversupply will drive a wave of defaults in industries from steel and coal to metals and cement, analysts including Yan Yan and Christina He said. Unlike in the past, the authorities are ready to implement a “slow and painful” reform of the commodities sector, they said.