China’s 2025 steel demand to fall 1.5% on year, state research institute says
China's steel consumption in 2024 and 2025 is forecast at 863 million metric tons and 850 million tons, respectively.
The turmoil on Chinese share and currency markets, and worries about the true extent of the country’s economic slowdown continue to rattle investors.
The health of the Chinese economy is crucial for metals and minerals prices. China represents more than 70% of the seaborne trade in iron ore and imports roughly 40% – 50% of the world’s base metal production.
But getting a handle on China’s real GDP numbers is difficult with Beijing showing a propensity to massage official numbers to fit its agenda and assuage any doubters about its ability to steer the economy.
So far Chinese authorities have maintained the country remains on track to meet official forecasts of 7% GDP growth in 2015. That would be the slowest in more than two decades but still a healthy clip for an economy that’s now the world’s biggest in terms of purchasing power.
Other indicators of domestic economic activity including construction starts, exports and vehicle sales point to a much more dire situation. But one number really stands out.
State news outlet Xinhua on Tuesday announced China’s rail freight volume plunged 10.9% year-on-year to 278.9 million tonnes in July.
For the first seven months of 2015 the decline is a whopping 10.2% to 1.98 billion tonnes compared to the same period in 2014 according to the National Development and Reform Commission.
The NDRC blamed – what else – “plunging demand for transportation of major commodities, including coal and metals” for the weak numbers.
Not a slower rate of growth but a double digit and accelerating contraction: It’s a startling number which hasn’t been as widely quoted by newswires and analysts as you would expect.
Perhaps with so much going on – unprecedented currency devaluation, crazy stock markets and port explosions – it’s just too difficult to absorb more bad news from the Middle Kingdom.
Pile ’em high
SEE ALSO:
The real reason the copper price is being crushed
Hidden inventory and the Chinese carry trade
4 Comments
Pat Wood
Chinese producers of iron ore are high cost, and the grades are garbage. Chinese steel mills need better grades of ore to remain competitive, and that ore comes from Australia, which is swimming in the stuff. High-grade Aussie iron ore comes to China aboard ships, and Aussie sourced iron ore is taking large market share from domestic Chinese suppliers. The same phenomena is going on in the met and thermal coal markets. It is thus logical that Chinese rail traffic would suffer from the loss of hauling domestic iron ore and coal around the country. Most of the newer, more efficient Chinese steel mills are near the coast, and if they supply from Australia, Chinese bulk rail traffic takes a hit. To extrapolate the trend as the basis of some wild theories of pending economic collapse of China, is a bit of a stretch, and smacks of desperation by those running down China in the press on a daily basis.
JH
Hello guest…it is a Frik Els article so you don’t need to worry. You were spot on in your assessment.
The Chinese Govt has been trying to keep the small Chinese iron ore guys going because it is labour and money in the countryside. But even the Govt doesn’t have infinitely deep pockets (unlike the US …. currently).
There is one other variable…China does not have a national grid..they have a national rail network that hauls coal to local power stations. The reduced haulage may well indicate less electricity use in industry, because less industrial use.
Guest
Its not only iron ore that’s on those trains and rail is not the only indicator. Other indicators down as well, across the board. From cement, to steel, plate glass and some of the auto producers already feel it too… Your argument assumes that there are only very few products transported and those were not completely substituted by Australia. That’s too simple… How do European Container shippers feel it if your argument would hold?
wags1
China’s greatest internal worry is keeping the masses who live in the interior parts of the country placated. A downturn in their economy could really cause problems in that regard.