China's steel prices and profits may rebound in 2020 as lower iron ore prices are likely to ease cost pressures on steel mills, while demand from the real estate and infrastructure sectors will remain stable, said the China steel logistics professionals committee (CSLPC).Next year is the final year of China's 13th five-year economic plan and a cut-off date for completion of several pending infrastructure projects, which will support steel demand. An acceleration in development of large-scale projects such as integrated development in the Yangtze river delta, and co-ordinated development of Beijing, Tianjin, Hebei and the Guangdong-Hong Kong-Macau greater bay construction projects will add to infrastructure spending.Beijing may also further accelerate funding for infrastructure projects to shore up sagging economic growth.New areas under construction for real estate projects have accelerated in the second half of 2019 and will possibly maintain the robust pace of growth next year."At least in the first half of 2020, there will still be a large number of sites under construction to support steel demand," said the CSLPC. The increased use of pre-fabricated structures to build houses and projects to build better housing for rural areas will add to steel demand. But demand growth may slow in the second half of 2020 with Beijing expected to take steps to curb speculation-related home price increases. Overall steel demand growth may stabilise or marginally slow in 2020.Steel output may increase in 2020 on the back of relaxed environmental restrictions and continued replacement of older production capacity with smaller but more efficient newer capacity. But efforts to consolidate the steel sector and eliminate backward production capacity in the final year of the 2016-20 economic plan may curb output growth, with the growth rate possibly slower in 2020 compared with 2019. CSLPC is projecting China's steel output to exceed 1bn t in 2020.Steel prices may be swayed more by demand than supplies in 2020 with an easing of
environmental restrictions to stabilise production during the year. Increased demand for steel during the two peak seasons of spring and autumn will lift prices and provide enough momentum to lift average steel prices and profits in 2020, the CSLPC said. Cost pressures are forecast to ease in 2020 as Brazilian mining company Vale increases iron ore output from its mines as it recovers from disruptions caused by the fatal collapse of a tailings dam in January 2019, which will further support steel profits.
Source:https://www.argusmedia.com/en/news