IREPAS meeting: Slower Chinese steel demand due to huge post-2008 incentives

At the SteelOrbis 2013 Spring Conference & 68th IREPAS Meeting held in Doha on March 3-5, Phil Englin from World Steel Dynamics (WSD) has said that the recent slowdown in Chinese steel demand is a result of the slowdown in fixed asset investments, since the huge incentives released after the world economic crisis condensed the demand potential within a shorter than normal period of time. He added that steel intensity per gross fixed capital formation (GFCF) has also decreased in China.
 
On the issue of whether India, seen as a new potential China, would also witness a rapid growth in its steel demand, similar to China where demand for steel increased rapidly especially after 2007, Mr. Englin told the attendees at the Doha event that, due to political obstacles and its service-driven economy, India is lagging behind the Chinese model. If India had shown the same steel demand growth rates as China, its steel demand last year would have been twice what it actually was, Englin said.
 
According to WSD expectations, the obsolete scrap reservoir in China in 2012 totaled about 57 million metric tons, while China's demand for scrap was 62 million metric tons. However, since obsolete scrap accumulation is related to steel demand 20 years earlier in a given country, China's obsolete scrap reservoir is foreseen to rise to 220 million metric tons by 2025, while its scrap demand is expected to reach 151 million metric tons by then, if the present steel industry structure is maintained, the WSD official stated. Eglin concluded by saying that if Chinese mills increase their scrap usage in blast furnaces, or if the share of EAF-based steel production rises in the country, or if China becomes a significant scrap exporter, such changes will certainly have profound implications for the structure of the global steel industry in the years ahead.