At the SteelOrbis 2024 Spring Conference & 90th IREPAS Meeting held in Berlin on April 28-30, Yuan Wenjiong, chairman of Dao Fortune, presented a comprehensive analysis of the dynamics of China’s steel market. Focusing on critical changes in the global long steel market, Mr. Wenjiong dissected factors influencing China’s local steel consumption, exports and production dynamics, alongside the impact of external forces like the EU’s Carbon Border Adjustment Mechanism (CBAM) and raw material price trends.
Mr. Wenjiong’s presentation revealed a stark reality: the Chinese steel market faced formidable challenges during the first quarter, with the post-Chinese New Year holiday period characterized by a persistent decline in local demand. Despite a promising start in January, the subsequent months, particularly February and March, witnessed a continuous downturn, with apparent rebar demand plummeting by 24 percent year on year in the January-March period. This downward trajectory, accompanied by significant price fluctuations, only stabilized in April, leaving production levels subdued, while inventories remained cautiously healthy.
“In the first quarter, steel exports surged by 6.06 million mt, marking a remarkable 30.7 percent year-on-year increase,” Mr. Wenjiong highlighted, adding, “This unexpected uptick served as a crucial pillar supporting general demand, bolstering domestic prices amid challenging market conditions.” He further emphasized, “Anticipation remains high for April’s export figures, with expectations of a continued robust performance”. Responding to a question about China’s exports for the current year, Mr. Wenjiong said that they will exceed 90 million mt and mostly consist of flat products. Regarding the recent investigation into non-VAT exports from China, he said he believes that exports may decline a little but not too much.
Market difficulties extended beyond Chinese borders, as global steel demand remained dull across key markets, Mr. Wenjiong indicated, going on to say that factors such as geopolitical tensions and economic uncertainties, exemplified by the elections in India and conflicts in the Middle East, have aggravated the broader downturn.
At the heart of the Chinese domestic downturn lies the real estate sector’s struggles, where new home sales plummeted by over 19 percent year on year in the first quarter. This downturn reverberated through the construction steel segment, aggravating the weakened demand. Additionally, infrastructure investment growth decelerated, particularly in municipal government construction, further dampening market sentiment.
Looking ahead, Wenjiong outlined a multifaceted approach to reviving market vitality. “Accelerating the issuance of local government special bonds has emerged as a crucial strategy to support infrastructure projects, alongside the targeted financial support for critical sectors and initiatives to stimulate equipment renewal,” he explained. Furthermore, the introduction of ultra-long-term special treasury bonds holds promise in terms of driving demand, especially in sectors like urban-rural integration and regional coordination, he noted.
However, Wenjiong commented that, at the same time as these efforts, there is the looming challenge of the EU’s CBAM, which presents a formidable obstacle for Chinese mills, while the imperative to transition to green steel production necessitates the exploration of alternatives like HBI and hydrogen. Yet, he admitted that uncertainty shrouds their viability and implementation, casting a shadow over the industry’s path forward.