According to Banchero Costa’s China Iron Ore and Steel Outlook report, while the outlook of China’s steel production has been generally uncertain, China’s iron ore imports have showed continued strength.
While China’s steel output has increased significantly over the years, growth appears to have plateaued since 2014, as steel mills in China have been facing tougher environmental regulations, tighter credit, and capacity curbs. The Chinese government itself is of the view that steel production peaked in 2014 and it expects steel production to fall to 788 million mt in 2017, due to a flat steel export forecast of 100 million mt, and a fall in steel demand by 1.8 percent to 660 million mt.
However, Banchero Costa said that “not everyone believes that peak steel output has passed”, with BMI Research expecting China to produce 825 million mt of crude steel in 2017, mainly due to improving domestic steel demand.
Regarding iron ore, the Banchero Costa report pointed out that China’s total iron ore imports in 2016 came to 1.02 billion mt, up 7.5 percent year on year. Despite a slowdown in ore imports in 2015, monthly volumes have continued growing in line with the long-term positive trend seen over the last decade.
However, downside risks for iron ore import volumes remain, including the potential for lower steel output, the end of iron ore restocking, and high iron ore prices, which may encourage destocking and an increase in domestic output.