Crude steel output to drop in 2015: CISA

Industry under pressure from slowdown, overcapacity

China's crude steel output is expected to fall by 1.07 percent year-on-year to 814 million tons in 2015, an industry official said Wednesday, adding that demand has already peaked.

Li Xinchuang, deputy secretary-general of the China Iron and Steel Association (CISA), made the forecast at an industry conference, Reuters reported Wednesday.

If the forecast turns out to be correct, it will be the first time in more than three decades that the country has seen a decline in its annual crude steel output.

"The steel industry has already felt the pinch from China's economic slowdown, especially in the real estate sector," Zhang Lin, an analyst with Beijing Lange Steel Information Research Center, told the Global Times Thursday.

In 2014, the country's crude steel production increased by just 0.9 percent year-on-year to 823 million tons, compared to a 7.5 percent rise in 2013, according to the National Bureau of Statistics.

Lackluster performance in the real estate and manufacturing sectors along with slower growth in fixed-assets investment means the industry is burdened with oversupply, which has weighed on steel prices, Zhu Jimin, executive vice president of the CISA, told a press conference in Beijing on January 29.

The average price of eight major categories of steel products fell by 10 percent in 2014, according to a CISA report published on January 29.

The average price of rebar, which is used in the real estate sector, saw the sharpest decline, falling 12.9 percent year-on-year. The average price of galvanized steel sheets, which are used in the automobile manufacturing industry, was down 6.78 percent year-on-year.

"With the implementation of China's revised Environmental Protection Law from the beginning of 2015, steel firms will face a tougher year, and some will be forced to shut down due to the stricter environmental requirements," Zhang said.

The drop in China's steel production, which accounts for nearly half of the world's total steel output, will dampen demand for iron ore - the raw material for steel-making - putting further pressure on iron ore prices, analysts said.

"The forecast is not good news for global iron ore giants, which have depended heavily on Chinese demand," Liu Zhiqiang, an analyst with Shandong-based commodity consultancy Sublime China Information, told the Global Times Wednesday.

Chinese demand growth has supported a trebling of BHP Billiton's iron ore production over the last two decades, its CEO Andrew Mackenzie said in a statement released in December.

The Australian miner, which started shipping iron ore to China in 1973, said its total iron ore exports to the country surpassed 1 billion tons by the end of 2014.

Li from the CISA estimated that China's imports of iron ore would grow by 7.1 percent year-on-year to 1 billion tons in 2015, with Australian and Brazilian miners accounting for about 80 percent of the total imports, according to Reuters.

China, the world's largest buyer of iron ore, imported a record 932 million tons of the metal in 2014, an annual increase of 13.8 percent, according to data from the General Administration of Customs.

This meant that the proportion of imports in China's total iron ore consumption rose to 78.5 percent in 2014 from 68.8 percent in 2013, according to the CISA.