China's crude steel
production has seen critical increases since 2002 to the present. For example:
Production levels were at 182.2 million mt and 220.1 million mt in 2002 and 2003, respectively.
Production for the first six months of 2004, according to the
China Iron & Steel Association (CISA) is reported as 103,907 million mt.
CISA predicts that
China's 2004 total crude steel
production will reach approximately 277 million mt, revised down from previous forecasts of over 300 million due to raw material shortages and financing issues.
Another explanation for expert's lower revision of crude
production forecasts is the increasingly prevalent problem of power shortages, directly impacting
China's mini-mill plants which utilize electric arc furnaces. For example, the State Grid Corporation of
China (SG) last week announced a new record set for electricity
consumption at 6.406 billion kwh, 107 million kwh more than the previous record high set in June. Statistics indicate that the country's electricity demand has increased by about 16% in the first six months of this year compared to the same period last year. Accordingly, since the country's power supply security has become a serious issue for
China's rapidly growing economy, the Chinese government announced last week that it has decided to build two new nuclear power plants. The two nuclear facilities will be built in Shanmen in Zhejiang province and Lingao in Guangdong province.
China's crude steel
consumption has also shown major increases since 2002 to the present, with
consumption rates of 206 million mt and 232.4 million mt in 2002 and 2003, respectively. Furthermore, CISA forecasts total
consumption for the full year 2004 to reach 280 million mt, after having reached 150 million tons in the first half.
Looking back on
China's imports for the past 3 years:
China's total steel imports for 2002 were 29.3 million mt and 43.2 million mt in 2003. Imports to date in the first six months of 2004 are 18.04 million mt, down by 2.5% from the same period of last year, marking the first decline in steel imports in many years.
Total imports for the year 2004, according to the
UK's Iron & Steel Statistics Bureau (ISSB), could reach 45 million tons despite the downward trend.
However, other experts in
China predict a lower figure of approximately 35 million tons, particularly due to the raw materials supply shortage. According to this estimate, the 35 million tons would include around 30 million tons of finished products and 5 million tons of semi-finished products. Contract imports to meet the needs of foreign processors operating in
China are estimated to be at least 1-1.5 million tons per month.
Considering that
China faces
production capacity shortages, particularly for flat rolled products, imports of hot rolled coil (
HRC) and cold rolled sheet (CRS) are predicted to increase dramatically in proportion to total imports in order to meet the increased demand. In fact, the most imported products so far in 2004 have been
HRC and CRS.
As SteelOrbis previously reported back in June, Taiwanese
China Steel Corp and Japanese Sumitomo Metal Industries made plans to build new plants in
China, one in particular having a
production capacity of at least 300'000 tons of steel
plate annually. In addition, as reported on SteelOrbis' site in May, Chinese steel producer Jinan Iron & Steel is planning to expand its capacity in the coming years to 8 million tons in 2004 and 10 million tons by 2007.
One of the implications of these
production capacity expansion plans is a bullish market for raw materials suppliers, particularly
iron ore, coke, and steel
scrap. Moreover, Chinese imports of
iron ore from
Australia this year are up by about 17% and from
Brazil by 11%.
Ore imports from
India have doubled compared with the same period last year, and have overtaken
Brazil, making
India China's second largest import source after
Australia.
Scrap imports into
China have also risen in the first five months of 2004 by around two-thirds. For example, there have been large increases from the USA,
Japan, and
Russia and Japanese exports of
scrap to
China are up by 50% this year.