China industry body sees steel demand rising in 2021, seeks to secure raw material supply

Min Zhang and Shivani Singh
Updated ·2 min read
Workers load steel products for export to a cargo ship at a port in Lianyungang

By Min Zhang and Shivani Singh

BEIJING (Reuters) - China's steel demand will increase slightly in 2021, supported by stable macroeconomic policies, the steel association said on Wednesday, even as the government has urged companies to produce less steel this year.

Economic policies that China adopted to cope with the COVID-19 pandemic will shore up China's steel demand, Qu Xiuli, vice chairwoman of the China Iron and Steel Association (CISA) said at a news conference.

Citing a desire to reduce carbon emissions, the industry ministry had asked China's mammoth steel sector to produce less crude steel in 2021 than the record 1.05 billion tonnes it logged last year.

But CISA's vice chairman, Luo Tiejun, told the briefing that higher demand this year could be met by other means.

"We can strengthen imports of primary steel products, especially billets... so that rising demand can be met without increasing output," said Luo. Billet is a raw length of steel that has to be processed further.

Luo also said the government is planning to roll out favourable policies to encourage such imports.

The world's top steel producer shipped out 53.67 million tonnes of steel products in 2020, down 16.5% from 2019. Its steel imports, meanwhile, jumped 64% last year, and billet imports rose by almost 500% in 2020, according to the CISA.

As the recovery of steel demand and production in other markets still faces difficulties amid the pandemic, the CISA expected China's rising imports and falling exports to continue this year.

RAW MATERIALS CRUNCHES

The association also warned of supply issues for steelmaking ingredients, which Luo described as one of the "sour points" of China's ferrous sector.

According to a draft plan for steel industry development issued by the industry ministry last December, China aims to build one or two major overseas iron ore mines by 2025 to boost supply of the steelmaking ingredient. It currently imports 80% of the iron ore it uses.

Besides Simandou iron ore project in Guinea, with blocks 1 and 2 backed by SMB-Winning and block 3 and 4 backed by Rio Tinto, Chinalco and Baowu Group, Luo said the association is also lobbying the Chinese government to lower taxes and fees for exploitation of domestic mines.

The CISA has also suggested improving steel scrap-related policies to take advantage of resources at home after Beijing allowed imports of high-grade scrap this year.

While surging raw material prices - iron ore, coking coal and coke - are largely squeezing steelmakers' profits, Luo said mills have to eventually take measures to lower costs and prevent operational risks.

(Reporting by Min Zhang and Shivani Singh; Editing by Tom Hogue, Ana Nicolaci da Costa and Gerry Doyle)