No matter the type or amount of stimuli put in by the Chinese Government, the country’s economy is just not getting back into revival mode. Meanwhile, China’s beleaguered steel industry continues to suffer. As part of efforts to boost economic growth, China cut down its benchmark lending rates after the apex bank lowered interest rates in late September. Still, according to the latest reports, the expected boost is simply not happening.
The World Steel Association has downwardly revised its earlier 2024 steel demand forecast for most major economies, including China. However, what the WSA says about the latter is by far the most interesting.
Continued weakness in manufacturing activities and refusal by the country’s consumers to by new real estate, among other factors, have all contributed to the downward revision. In fact, the WSA now predicts that the steel demand outlook in China will be less than half of global steel consumption, something that has not happened in the past six years.
Dominate the steel industry competition with valuable, monthly industry information. MetalMiner’s monthly free MMI report gives monthly price trends for 10 different metal areas, including copper, steel, aluminum and nickel. Sign up here.
Could More Stimulus Aid China’s Steel Industry?
The WSA report also stated that the present downturn in real estate will impact steel demand in China, resulting in a 3.0% decline in 2024 and a drop of roughly 1.0% next year. However, the report does not negate the possibility of even more intervention on the government’s part to push the economy upward. Depending on the nature of the efforts, they could potentially boost Chinese steel demand in 2025.
China has been trying its best to prop up its economy, which started floundering post-COVID. Recently, China’s housing ministry announced an expansion of the “whitelist” of real estate projects as well as measures to help speed up the lending by financial institutions for incomplete projects. What’s more, about 50 cities across China have already implemented policies intended to stimulate the real estate market. These include lifting previously imposed restrictions on home buying and even extending offers to non-local buyers.
Reasons Why Measures Have Failed
Since the COVID epidemic, China’s economy has faced a slew of ongoing challenges, including a slowing real estate market and weaker consumer demand. The government’s counter-response, economists say, is simply not working. Many blame this on remaining uncertainties in global economic conditions, persisting domestic financial risks, and a host of internal Chinese problems.
For instance, China’s consumer confidence remains low due to massive youth unemployment. There’s also a weakening global demand for exports amid a growing number of geopolitical tensions. Many countries, including neighboring India, continue to protest the flooding of their local markets with cheaper Made In China steel. Others have already imposed tariffs.
Currently, the WSA projects that China’s steel consumption will drop to 869 million tons in 2024. In contrast, demand outside of China is expected to increase by 1.2%, reaching 882 million tons.
Opt into MetalMiner’s Weekly Newsletter and get useful market insights on steel industry news to help you avoid buying steel at the wrong time.
Is India the New Steelmaking Favorite?
It seems China’s primary competitor, India, is the “new steel player in town.” The WSA predicts India’s market will grow by 8% in 2024. This comes after the local steel industry touched about 14% last year. Along with India, some emerging and developing economies will also see an increase of about 7% for the second year in a row.
The WSA report details how India has emerged as the strongest driver of steel demand growth since 2021. Most importantly, unlike China, major infrastructure projects on the subcontinent will continue to fuel the need for more steel.
As India slowly starts to replace China in steel consumption, the clamor for more tariffs on Chinese steel continues. According to some media reports, India’s steel ministry is pushing for a temporary tax on imports to shield the domestic steel industry from the ongoing influx of foreign material, which can lead to price fluctuations and competitive pressures. This tax would serve as a short-term solution to stabilize the market and create a fair environment for domestic producers.
Plan your metal purchases with precision, ensuring maximum profits using MetalMiner Insights’ comprehensive short and long-term price forecasts. Click here.
