Chinese Steel demand growth is expected to decelerate in the absence of stimulus measures
SHANGHAI (Scrap Register): In the first half of 2018, Chinese steel demand got a boost from the mini stimulus in real estate and the strong global economy, according to the World Steel Association (worldsteel).
However, continued economic rebalancing efforts and toughening environmental regulations will lead to deceleration of steel demand toward the end of 2018 and 2019.
Both downside and upside risks exist for China. Downside risks come from the ongoing trade friction with the US and a decelerating global economy.
However, if the Chinese government decides to use stimulus measures to contain the potential slowdown of the Chinese economy in the face of a deteriorating economic environment, steel demand in 2019 will be boosted.
China continued to close most of its outdated induction furnaces in 2017, a category which was not captured in official statistics. While nominal steel demand growth in China in 2018 is expected to reach 6.0%, the dynamics of steel using sectors suggest growth of 2.0% in real terms.
Accordingly, real global growth in 2018 is 2.1%. As happened in our October 2017 Short Range Outlook, the disparity comes from an underestimation of 2017 steel use that had been supplied by the illegal induction furnaces.