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Contradictory views on Chinese steel output

South China Morning Post reported that a new Australian government report predicting China’s steel production will peak this year and start to decline over the next two years is at odds with expectations in the mainland that output will actually increase because of the government’s renewed focus on infrastructure investments to stabilize economic growth. Mr Wang Guoqing, research director at Lange Steel Information Research Centre, said that “If the intensity of environmental regulation is the same as last year, steel production this autumn and winter is expected to be higher than the same period last year. The output restrictions have become normal and the steel market has adopted to them.”

The China Iron and Steel Association also flagged possible stronger steel output soon, since accelerating fixed asset investment in the steel industry over the first eight months of this year indicates new production capacity. According to a report by the association released last week, in the January-August period, investment in Chinese steel industry increased 14.8 per cent from the same period last year, accelerating from the 8.6 per cent growth in the first half of year and 3.4 per cent gain in the first quarter

According to a quarterly report on resources and energy released by Australia’s Department of Industry, Innovation and Science, steel output in China, by far the world’s largest steel producer, is forecast to peak at 886 million tonnes this year, but will shrink over the period to 2020 to 842 million tonnes. The department also estimated Chinese steel consumption would slump by 1.9 per cent in 2019 and 2.3 per cent in 2020 after increasing 2.8 per cent this year. The report said the reversal of the mainland production trend will be driven by a series of government policies, including stricter environmental regulation, reforms that will shutter some loss-making production capacity, and reduction in debt at state-owned enterprises.

Morgan Stanley also said China’s crude steel production would fall in the period to 2023, with Chinese iron ore demand peaking at 1.28 billion tonnes this year. Last month, S&P Global Ratings also predicted a 2 per cent drop in mainland steel output next year. And in a report published in April, the World Steel Association said Chinese steel demand was expected to contract by 2 per cent in 2019, after stagnating this year.

Over the first eight months of this year, Chinese steel mills produced 617 million tonnes of crude steel, a 9 per cent increase from the same period last year, with monthly output reaching a record high of 81.24 million tonnes in July.
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