Chinese Steel Market: 5 Trends for 2020
17 Dec 2019 - Production
When you talk about the Chinese steel market, you perhaps think of “quantity-based”, “fast growing” or “state owned” industry. In recent years the Chinese steel industry has undergone a major transformation, which could even be called a restructuring. In this article we want to share a few keywords to give you an overview of the latest developments in the country’s industry.
5 Trends for the Chinese Steel Market 2020
1. Capacity Control
China's steel industry is burdened by overcapacity. As the National Bureau of Statistics (NBS) showed, China produced 87.25 million tons of steel in August 2019, up 2.4% from 85.22 million tons in July and up 9.3% from a year earlier. In 2018 the country produced a record 928.26 million tons of crude steel, up 6.6% from 2017.
In order to decrease the unnecessarily competition and improve the industrial structure, Chinese Government has started a nationwide capacity reduction. One of the main objectives of country’s "Five-Year Plan (2016-2020)" is to reduce overcapacity in steel production. By the end of 2018, 140 million tons of "low quality capacity" had been dismantled.
The overall capacity will continue to be strictly controlled in the future in the interests of environmental protection and healthy market competition.
2. Reasonable Profit
Since 2015, the Chinese steel industry has gradually recovered from the recession thanks to the general economic boom and capacity control. The industry's profitability is growing smoothly. According to China Statistic Bureau, the overall profitability of the Chinese steel industry reached RMB 403 billion (52 billion euros) in 2018.
Since June 2019, however, the global economy has been slowing down and the raw material prices (such as ore) are volatile, casting a shadow over the industry.
Experts forecast that the pace of growth will probably slow down in the coming years.
3. Go Green
"Go Green" is meanwhile one of the most important KPIs for Chinese steel producers. The government has paid great attention to this matter with a series of measures. One of the initiatives is the relocation of steel mills from densely populated urban areas.
In addition, environmental protection has changed from pure emission reduction to clean production and environmentally friendly production with a focus on energy efficiency and environmental protection technology.
The Chinese Ministry of Ecology and Environment recently published a white paper entitled "Opinions on Promoting the Implementation of Ultra-low Emissions in the Iron and Steel Industry", which leads steel producers into a green era with extremely low emissions.
4. Nationwide Merger
In order to optimize the product mix and reduce domestic competition, the government is leading the nationwide and cross-sectional merger.
According to China Steel Association, China's 10 largest steel enterprises produced 340 million tons, covering 36.5% of total domestic steel production in 2018. The goal is to reach 60% in the next few years, fostering further mergers and acquisitions.
China Baowu Iron & Steel Group recently officially merged with Maanshan Iron & Steel Group. After the merger, the new steel giant is expected to reach 87 million tons per year, one step away from the annual production of 92.5 million tons of ArcelorMittal, the world's largest steel group.
5. Smartness and Intelligence
For some time now, the industry has been focusing increasingly on intelligent manufacturing. The Internet of Things, Big Data, Cloud Computing and Artificial Intelligence are becoming more and more popular in the various types of conferences and forums.
The industry is not only interested in ERP, MES, planning and quality anymore. Some of the leading companies are already one step ahead and aim to achieve seamless integration between equipment, factories, end users and upstream and downstream companies.
The government and the companies are ready to invest in innovations in service-oriented production, a high-quality product mix and the flexibility to adapt to the future market.
Conclusion
There is no doubt that the government plays a dominant role in the recent development of the Chinese steel industry. With the instability of the world economy and the negative effects of political conflicts, Chinese steel companies are also keen to improve their production quality, use the latest technologies and comply with environmental regulations. The experts expect a second round of strong domestic competition in the future and the industry has not yet completely finished restructuring.
What's your opinion on this topic?
Tracy Gu
Business Development PSI Metals
Having worked in various areas within PSI Metals, Tracy's heart beats for sales and communication with the market. With the intensive experience she has gained in both the Chinese and European markets, Tracy enjoys the broad horizons and insights that both sides offer. In her free time she likes to travel and spend time with her niece.
+86 139 1610 8104
lgu@psi.de
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