China's Steel Production Rebounds in 2023 Amidst Changing Industry Dynamics

China's Steel Industry Resurgence in 2023

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In 2023, China's steel production is projected to experience an upswing, marking the first such increase in three years. This rise comes amidst challenges in the domestic property sector, traditionally a major consumer of steel. The property sector, which accounts for about 35% of China's steel demand, has been struggling with liquidity issues and a notable decline in sales, specifically a 7.8% drop in sales by floor area compared to the previous year.

Despite the downturn in the property sector, other industries are contributing to the increased demand for steel. The surge in steel output is attributed to robust vehicle manufacturing and a significant uptick in exports. The automobile production in China reached a record high, with November's production alone showing a substantial increase from the previous year. This robust demand from the automotive sector, along with resilient exports, is compensating for the softness in the property sector.

The Chinese government appears to be adopting a less stringent approach towards steel output cuts, likely due to concerns over economic growth. This stance is expected to result in only mild declines in crude steel production in the coming months, potentially stabilizing or even increasing steel prices and benefiting China's steel exports.

Overall, the anticipated increase in steel output in 2023 reflects a shift in the drivers of steel demand within China. While the property sector remains uncertain, other sectors such as vehicle manufacturing and exports are showing solid growth, contributing to the overall resilience of the steel industry in China.

Source : Reuters (Reporting by Clyde Russell)