SHANGHAI, May 18 (SMM) – China’s iron and steel sector is unlikely to substantially feel the supply pressure stemming from concentrated capacity replacement until next year, as most of the projects will not come online until the end of this year, SMM expects.
The second half of 2020, an anticipated peak year for steel capacity replacement in China, is expected to see 83% of new iron-making capacity for the full year, 79.3% of converter steel-making capacity and 81.6% of electric furnace steel-making capacity for the year coming on stream. Supply pressure from those new capacity, however, is unlikely to take hold until next year, as the commissioning of most of those facilities is in December.
China’s iron-making capacity to shrink 320,000 mt/year in 2020
A total of 38 blast furnaces, with combined iron-making capacity of 57.54 million mt on an annualised basis, are expected to come online in China this year, with 47.76 million mt, or 83%, in H2, according to data compiled and calculated by SMM.
By region, 52.2% of the new capacity for this year is in north China, 19.4% is in the east and 13.1% is in the south, while the top steelmaking province of Hebei is the home to 77.5% of north China’s new capacity.
China’s new iron-making capacity coming online in H2 is estimated to require 81.19 million mt of iron ore per annum, and the majority of those raw materials will be sourced from abroad, as the proportion of foreign ore usage to total iron ore usage at those projects ranges 50%-100%, or averages 80%.
For the full year of 2020, 57.86 million mt of blast furnace capacity will go offline, indicating a net reduction of 320,000 mt.
Table 1: China’s new iron-making capacity anticipated in H2 2020
Source: SMM
Steel-making capacity to decline 5.8 million mt/year this year
This year, converters coming online in China are estimated to reach 47.57 million mt on an annualised basis, with 37.7 million mt, or 79.3% in H2, while those going offline will total 57.86 million mt, with 50.41 million mt in H2. That implies a net decline of 10.29 million mt for the year.
EF steel-making capacity in the country, however, is expected to see a net increase of 4.49 million mt for 2020, boosting annual steel scrap consumption by 2.81 million mt.
A total of 26 EF lines will be put into operation this year, translating to 22.92 million mt of steelmaking capacity, while 18.43 million mt will come offline. About 81.6%, or 18.71 million mt of new EF capacity for the year will not come online until H2.
Table 2: China’s new steel-making capacity anticipated in H2 2020
Source: SMM
Guangxi Liuzhou to commission 7.5 million mt/year of bar capacity in August
Guangxi Liuzhou Iron and Steel plans to put 7.5 million mt on an annualised basis of rebar and high-speed wire rod into operation in August, which will exert downward pressure on long steel prices in China.
Rolling capacity in China is expected to grow at least 25.2 million mt this year, as the country’s industry ministry did not put a brake on the expansion of such capacity.
Most of the facilities will not come online until December, which will have limited impact on the market in H2.
Table 3: China’s new rolling capacity anticipated in H2 2020
Source: SMM
