Steel Output May Reach 1 Billion Tons This Year

According to the investigation and latest report released by the China Wulian Iron and Steel Logistics Professional Committee, the average annual PMI of steel in 2019 was 47.2%, a decrease of 3.5 percentage points from the same period last year. Affected by the increasing downward pressure on the domestic economy and the slowdown of the global economic growth, the development of the steel industry has slowed down in 2019, the market supply and demand growth has declined, and corporate profits have declined.


 


The report looks at the industry situation throughout the year. First, the overall growth rate of steel production has slowed down and fluctuated greatly from month to month. According to the statistics of the Bureau of Statistics, the total output of crude steel in 2019 is expected to be 980 million tons, an increase of about 5.6% compared to 2018, and the growth rate has dropped significantly. The average steel production index in 2019 was 47.9%, a decrease of 3.2 percentage points from 2018.


Second, the growth rate of market demand has slowed down, and the overall supply oversupply pattern has been maintained. In 2019, the average new order index was 43.9%, a decrease of 7.1 percentage points from 2018, and the average backlog order index was 47.1%, a decrease of 2.1 percentage points from 2018, indicating a decline in market demand.


Third, the cost of raw materials rose first and then fell, and the overall price of steel fell. Affected by factors such as the Vale mine disaster and the Australian hurricane, iron ore prices continued to remain high in mid-2019. The ordinary 62% iron ore index rose all the way from the beginning of the year at $ 73 / ton, reaching an all-time high of $ 126.2 / ton in early July. After August, the influencing factors gradually weakened.


Fourth, corporate profit growth has slowed. The report pointed out that, in addition to iron ore, the prices of raw materials such as coal, coke and scrap steel are at high levels, and the impact of environmental protection policies has caused the cost of enterprises to increase compared to previous years, while steel prices have not increased correspondingly, but have By the drop. Under the combined effect of these two factors, corporate profits are in a downward trend.


According to statistics from the China Iron and Steel Association, corporate profits have declined consecutively since the second half of 2019. It is estimated that the annual profit of member companies will be about 180 billion yuan, a decline of about 30%.

Overall, steel output may reach a new high in 2020, breaking the 1 billion mark, but the growth rate may continue to decline.


Steel price fluctuations have risen, and corporate profits have rebounded. The report believes that, from the perspective of supply and demand, under the circumstance that the environmental protection and production restriction is weakening, seasonal factors that affect the supply of steel mills will decrease, and the effect of demand on steel prices will increase. The increase in demand during the two peak seasons will also drive up steel prices. Iron and steel enterprises adjust their industrial structure and accelerate the concentration of production capacity. In 2020, steel prices may fluctuate and rise.


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