Slowdown in Chinese economy may influence Steel demand

CHINA December 28 2015 10:34 AM

SHANGHAI (Scrap Register): The winter months typically see a slowdown in economic activity in China, particularly in the colder north of the country, so the season correspondingly sees a contraction in steel demand, as per The Steel Index.

This year, many mills are struggling with finance. As year-end approaches, some will struggle to open the letters of credit required to purchase seaborne iron ore. Plunging iron ore prices will have put many miners back “in the red”. Some, such as Anglo American, have already taken action to trim output and strip out costs. 

The gap between world steel capacity and actual production has widened significantly and looks set to grow further, according to the OECD Steel Committee. 

They showed that excess capacity has averaged more than 500 million tonnes/year since 2008, up from an annual average of 238m t/y between 1980 and 2007. 

The industry’s capacity-utilisation rate has remained below 80% since 2009. Nominal capacity additions since 2003 have averaged 103 million t/y, up from just 5 million t/y in the period 1981-2002, the OECD said.