MPI report predicts fall in Chinese steel output in 2016

By Anil Mathews (ScrapMonster Author)

December 07, 2015 04:22:47 AM

BEIJING (Scrap Monster): A government report released Monday predicts that China’s crude steel output is likely to fall in 2016. This will be the second straight year of decline for crude steel output by the country.

According to the research report published by the Metallurgical Industry Planning and Research Institute (MPI), the production is likely to fall by over 3% year-on-year to 781 million tonnes next year. The slowdown in the country’s economy will hurt demand, the report says.

The consumption of steel products will decline to 648 million tonnes in 2016, down by nearly 3% from 2015 levels. Consequently, the consumption of steelmaking raw material is likely to decline. The iron ore consumption by the country is likely to witness decline of 4.2% to 1.07 billion tonnes.

The MPI report cites three reasons for the projected drop in crude steel output-economic slowdown, falling demand and overcapacity woes. The slowdown in economy has impacted demand from various manufacturing sectors. The high inventory levels are likely to add more woes to the downward pressure. According to MPI report, it will take more time for inventory levels to get depleted. As a result, many Chinese steel makers are being forced to implement temporary or permanent shutdown at their facilities.

The country’s crude steel production had touched record high of 822.7 million tonnes in 2014. Also, apparent crude steel consumption last year had registered a decline for the first time since 1981, totaling 738.3 million tonnes, down 3.4% from the year-before. Meantime, the crude steel output has declined by 2.2% during the first ten months of the current year to 675.1 million tonnes as compared with 690.3 million tonnes during the corresponding ten-month period in 2014.