Steel sec­tor to re­main re­silient in 2019, says ex­pert

China Daily - - BUSINESS - By LIU YUKUN li­[email protected]­nadaily.com.cn

Steel de­mand will re­main stable in 2019 backed by in­creased in­fra­struc­ture in­vest­ment, amid lin­ger­ing wor­ries that the in­flu­ence of trade ten­sions on the world’s largest steel-maker may shake up the global mar­ket, an ex­pert said.

“We are con­fi­dent about China’s steel in­dus­try given its great mar­ket po­ten­tial and the re­silience of China’s econ­omy,” Yu Yong, head of the China Iron and Steel As­so­ci­a­tion, said at an in­dus­try fo­rum.

“The in­creased in­fra­struc­ture in­vest­ment, to­gether with re­bounded growth of ship pro­duc­tion and man­u­fac­tur­ing, will lead to a slight in­crease in steel de­mand. Mean­while, steel de­mand in the sec­tor of ma­chin­ery and home elec­tric ap­pli­ances will likely re­main stable,” Yu add.

The com­ments came as the coun­try saw a 3.7 per­cent year-onyear growth of in­fra­struc­ture in­vest­ment (ex­clud­ing elec­tric power) in the first 11 months of 2018. The growth rate for the new year is fore­cast to be higher, ac­cord­ing to Yu.

Yu fur­ther noted that steel de­mand in car man­u­fac­tur­ing is un­cer­tain as the out­look for car sales in the new year will largely de­pend on poli­cies to boost con­sump­tion. The de­mand for steel in the real es­tate sec­tor, how­ever, may shrink as in­vest­ment slows and con­struc­tion de­clines.

Yu’s pos­i­tive views about China’s steel prospects con­trast with the World­steel Eco­nomics Com­mit­tee’s pre­dic­tions. The com­mit­tee said no growth in China’s steel de­mand in 2019 is likely to make the world steel de­mand growth drop to 1.4 per­cent from 3.9 per­cent.

“But chal­lenge en­dures for the coun­try’s steel in­dus­try as new economies spring up,” Yu added. That would in­clude a drop in de­mand for steel in China’s grow­ing emerg­ing sec­tors, and ris­ing re­quire­ments for steel qual­ity from man­u­fac­tur­ers in tra­di­tional sec­tors, Yu ex­plained.

Other chal­lenges in China’s steel mar­kets lie in the ris­ing cost of raw ma­te­ri­als, fi­nanc­ing dif­fi­cul­ties and tight­en­ing en­vi­ron­men­tal reg­u­la­tions, ac­cord­ing to Yu.

To bet­ter tackle the chal­lenges, more mea­sures are ex­pected to be rolled out from steel com­pa­nies.

Take the coun­try’s ma­jor An­steel Group Corp as an ex­am­ple. The group said at the fo­rum it would con­tinue with its re­forms in op­er­a­tional mech­a­nisms to en­hance its pro­duc­tiv­ity.

Such re­forms have led to a surge in sales of steel, which are nine times higher than that be­fore the re­forms be­gan, the group said.

In­tro­duc­ing new op­er­a­tional mech­a­nisms for State-owned en­ter­prises has proved an ef­fec­tive way to raise pro­duc­tiv­ity, said Ma Jun, direc­tor of the En­ter­prise Re­search In­sti­tute un­der De­vel­op­ment Re­search Cen­ter of the State Coun­cil.

“Other mea­sures in­clude fur­ther en­cour­ag­ing the mixed own­er­ship re­form and a more re­laxed reg­u­la­tory en­vi­ron­ment from the gov­ern­ment,” Ma said.

Yu’s pre­dic­tions fol­low stable growth in the steel in­dus­try in 2018. Ac­cord­ing to the China Iron and Steel As­so­ci­a­tion, the na­tion pro­duced 708 mil­lion met­ric tons of pig iron, 857 mil­lion tons of crude steel, and over 1 bil­lion tons of steel.

Such pro­duc­tion has gen­er­ally met mar­ket de­mand, Yu said.

Mean­while, the last year has seen an over­all stable price for steel, de­spite a fall in Novem­ber due to weak­en­ing mar­ket ex­pec­ta­tions.

“Our mem­ber steel com­pa­nies have seen good busi­ness per­for­mance last year,” said Yu. Ac­cord­ing to him, the mem­ber com­pa­nies gen­er­ated rev­enue to­tal­ing 3.76 tril­lion yuan ($556 bil­lion) in the first 11 months of 2018, up 14.17 per­cent year-on-year. Their profit reached 280 bil­lion yuan dur­ing the same pe­riod, up 63.54 per­cent com­pared with the same pe­riod in 2017.

HAO QUNYING / FOR CHINA DAILY

A tech­ni­cian checks rails at a steel plant in Han­dan, He­bei prov­ince.

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