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Steel demand may recover in the fourth quarter, potentially shifting the market dynamic from oversupply to improved balance, the China Iron and Steel Association said.
It attributed its optimism to growth-stabilizing policies and rising demand from fields like new energy vehicles and solar energy.
The association's prediction follows a joint plan released in late August by the Ministry of Industry and Information Technology and six other ministry-level authorities.
The plan aims to stabilize the steel industry's growth through measures like promoting technological innovation to expand the use of high-tech steel products in emerging sectors, thereby boosting demand.
Jiang Wei, deputy head of the association, said: "Thanks to policy incentives alongside the acceleration of manufacturing activities, demand for steel will pick up from sectors like automobiles, home appliances and ships. Additional demand will emerge from new energy industries like wind power and nuclear power.
"This, in turn, is expected to gradually restore steel demand in the fourth quarter. With companies' increasing efforts to manage production and policies to promote energy efficiency and strengthen environmental protection, the supply and demand situation is likely to improve."
The steel sector, according to the association, is currently undergoing cyclical adjustments, facing challenges like a sluggish recovery in demand from the traditional real estate sector, increasing periodic supply-demand imbalances and diminishing industry profits.
According to data from the National Bureau of Statistics, in the first three quarters, China's crude steel production reached 795 million metric tons, up 1.7 percent year-on-year. Crude steel consumption amounted to 731 million tons, down 1.5 percent year-on-year.
Jiang attributed the growth in production to increasing steel exports and the rise in steel demand from the domestic manufacturing sector, while reduced steel demand for construction was a major reason behind the overall decline in consumption.
Data from the General Administration of Customs showed that exports of steel increased nearly 32 percent year-on-year to 66.8 million tons in the first three quarters.
The imbalance between production and market demand has put a majority of traditional steel companies under operational pressures. Data from the association showed that total profit of member enterprises in the first three quarters fell by 34 percent year-on-year, with an average profit margin of only 1.33 percent.
In contrast, many companies in the special steels sector saw their profits increase. According to commodity price tracker Mysteel, in the first half of the year, 23 of the 36 A-share steel companies recorded profits, with seven seeing year-on-year growth. Five of those seven are categorized in the special steel sector in the A-share market.
Special steels boast physical and chemical properties that provide higher strength and toughness than ordinary steel. They serve specific purposes in areas like aerospace engineering and shipbuilding.
"In light of these challenges, the steel industry is actively cultivating novel and high-quality production capabilities, driving the transition toward high-end, intelligent and eco-friendly steel production through technological innovation. This focus on developing internal power is critical," said Jiang.
Shi Hongwei, deputy secretary-general of the association, said traditional steel firms are actively exploring opportunities in emerging sectors. They are producing relevant products to meet industry needs while creating new sources of growth.
For example, Angang Steel achieved major advancements in key technologies and products, including its 690-megapascal low-temperature steel used in building ships for carbon dioxide transport.
"In recent years, Angang has consistently bolstered its innovation capabilities and increased investments in research and development to surpass industry benchmarks," said Liu Fengqiang, general manager of the company's technology development department.
Profits of key association member enterprises have been increasing month after month since June. High-end steel demand continues to rise, with the number of steel varieties used in manufacturing industries like shipping, automotive and home appliances, as well as emerging industries like wind power and photovoltaics, steadily increasing. Xinhua
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- [Editor:kangmingfei]
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