The argument that Chinese steel output is at its peak gets some heavy-duty support today from Reuters:
Zhang Wuzong, delegate at the National People’s Congress (NPC) and chairman of private steelmaker Shandong Shiheng Special Steel said there was no room for further expansion.
“You can basically say that Chinese steel output has reached a peak…If the rate of economic growth can be adjusted properly, it can be sustained, but it won’t be growth in steel mills, or growth in polluting enterprises,” he said.
Deng Qilin, chairman of Wuhan Iron and Steel (Wugang) , China’s fourth biggest steel producer, and an NPC delegate, also said on Thursday that capacity was now more than enough, with supply heavily outstripping demand and failing mills under pressure from both the government and the market.
“I can tell you that the steel industry, globally and in China, is facing a big, big imbalance of supply and demand – it is facing serious overcapacity and if we don’t control it the industry at home and overseas will fall further into a deep winter,” he said.
“Expanding further is meaningless – if you are making losses, having more capacity will lead to even more losses.”
…”All the measures to eliminate capacity and control output are already in place,” he said. “I think it will take around five years or more.”
…Jiang Kejun, senior researcher at the Energy Research Institute, a government think-tank, said last month that 650 million tonnes of annual steel production would be more than enough to meet domestic demand in the coming years. He said production would fall to 610 million tonnes by 2020, 22 percent lower than in 2013, and would then decline steadily thereafter.
I’ve recently been ruminating on this subject. Following last year’s blowoff growth I would not be at all surprised to flt output growth this (or even minor falls). Longer term I wonder if we’ll still see some growth in global steel output as other Asian nations develop.
But be warned. Nobody has this in any of their of their iron ore pricing models. If it comes to pass, expect serious downside to the iron ore price, major ore miners and a life threatening situation developing for juniors.
