China’s steel demand seen rising 3% in 2021, but fall next year as stimulus effect subsides – worldsteel

Most steel-using sectors in China will show moderate growth and the country’s steel demand is expected to grow by 3.0% in 2021, but decelerate to 1.0% as the effect of the 2020 stimulus subsides, and the government focuses on more sustainable growth, worldsteel said in its latest short range outlook.

The government’s reaction to the new US administration’s trade policy and the intensified environmental push add uncertainty, it said in a statement.

China’s economy quickly rebounded from the lockdown in late February, and almost all economic activity except retailing resumed full productivity by May. Since then, despite sporadic small localised waves of COVID-19, economic activity has not been affected by the pandemic, unlike the rest of the world, worldsteel said in a statement.

The Chinese economy benefited from the government’s implementation of various measures to stimulate the economy. From several new infrastructure projects and accelerating existing projects, to relaxing control over the real estate sector and tax reduction to boost household consumption.

On top of this the economy benefitted from strong exports as the rest of the world was affected by the pandemic, the statement said.

As a result, after contracting by 6.8% in the first quarter of 2020, China’s economy recorded annual growth of 2.3% in 2020. China’s GDP growth is expected to accelerate to 7.5% or higher in 2021, followed by moderate growth of 5.5% in 2022, it pointed out.

The construction sector had a fast recovery from April 2020, supported by infrastructure investment. For 2021 and onwards, real estate investment growth may decrease due to the government’s guidance to slow growth in the sector down.

Investment in infrastructure projects in 2020 reported a mild growth of 0.9%. However, as the Chinese government has kicked off a number of new projects to support the economy, the growth in infrastructure investment is expected to pick up in 2021 and continue to affect steel demand in 2022.

In the manufacturing sector, automotive production contracted the most by 45% during the lockdown, but has been recovering strongly since May. For the whole of 2020, auto production declined by only 1.4%. Other manufacturing sectors have shown positive growth due to strong export demand.

“Due to the strong activity in the construction and machinery sectors, and with some inventory accumulations, apparent steel use rose by 9.1% in 2020. In 2021, it is expected that the stimulus measures introduced in 2020 will largely remain in place to ensure continued reasonable growth in the economy,” the statement said.

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