China to Lead Global Production, Use of Steel

Crude steel production worldwide is forecast to increase to 1.3 billion tons (1.2 billion t) this year and to 1.4 billion tons (1.3 billion t) in 2007, led by developing countries such as China, the Australian Bureau of Agricultural and Resource Economics says in a report.

“China will continue to be the most significant driver of growth in global steel consumption,” says ABARE, an independent government economic research agency.

China's steel production is forecast to grow, despite plans by the government's National Development and Reform Commission to reduce excess capacity in the industry. These plans likely will be ineffective due to local government opposition, and steel mills are expected to continue to increase output in response to relatively high steel prices, the report says.

China's net exports of crude steel are forecast to reach about 13.2 million tons (12.0 million t) this year and 17.6 million tons (16.0 million t) in 2007.

The Chinese government has said it intends to limit the construction of new steel mills. As a result, steel production growth is expected to slow this year.

“Despite the ongoing introduction of policy measures aimed at slowing capacity expansion in the steel industry, there is increasing speculation of oversupply in the domestic market, leading to downgraded profit outlooks for some producers in 2006,” the report says, adding oversupply in the domestic market may lead to further consolidation in the industry.

North American crude steel consumption is forecast to increase by 6% this year and 3% in 2007, representing a total of almost 200 million tons (181 million t).

In the European Union, crude steel use is expected to grow 5% this year to 213 million tons (193 million t) as a result of increased demand from the shipbuilding and construction sectors.

Global steel prices are expected to fall only marginally from relatively high levels this year.