While China’s steel consumption has been on the decline since 2021, global steel consumption has remained stable, supported by the strong performance in India and Japan.
Looking ahead, RHB Research noted that the World Steel Association expects sluggish global steel demand with a minor increase of 1.7% in 2024.
In 2022, China remained as the top crude steel producer and consumer in the world, while India and Japan hold the second and fourth positions as top global steel consumers.
“The Chinese steel industry is at a crossroads, as both production and consumption of crude steel have been steadily declining from the 2020 peak.
“The shifts have unveiled structural changes in China, as steel consumption transitions from the real estate sector to infrastructure and manufacturing, reflecting the challenges in its property market,” the research house said in a report yesterday.
In 2022, crude steel production and consumption in China stood at 1,018 million tonnes and 921 million tonnes, marking significant declines of about 47 million tonnes and 87 million tonnes respectively from the peak in 2020.
RHB Research said the robust performances of the infrastructure and manufacturing industries in China partially offset the drop in the volume of steel used in its property market.
“Moving forward, it is the consensus among local experts that both Chinese crude steel supply and consumption will continue their downward trends over the next five years.
“The projection is for net exports to remain at elevated levels, as the domestic Chinese market maintains its subdued state,” the research house said.
For the Asean region, steel imports dropped to 43.8 million tonnes in 2022 from its peak of 53.7 million tonnes in 2016, forming about 58% of 2022’s apparent steel consumption (ASC).
“Meanwhile, exports have grown substantially from 8.6 million tonnes to 19.2 million tonnes in 2022. Prior to 2020, the growth in exports was in line with the expansion of steel capacities.
“The subsequent surge in exports can be attributed to the strict lockdown measures imposed in China in 2020 and 2021,” RHB Research said.
The research house said the South-East Asia Iron and Steel Institute has raised concerns regarding such the increase in exports, as it indicates looming overcapacity issues within the region.
“The arrival of new integrated steel mills – expected to add more than 71 tonnes to the existing 75.3 million tonnes capacity – is poised to further exacerbate the persistent overcapacity issue, particularly as demand remains relatively stagnant in both Asean and China,” RHB Research said.
On the local front, the steel industry is still confronted with overcapacity and underutilisation challenges.
RHB Research said the country’s ASC still lagged far behind, struggling to catch up with the still-growing overcapacity situation and enduring challenge of low utilisation rates.
The research house also added that while the ASC of Malaysia’s flat steel has been steadily increasing over the years, the ASC of long products has been on a declining trend since 2014, although it showed a slight recovery in 2022.
“Alliance Steel expects to add another 6.5 million tonnes to its current installed capacity of 14.1 million tonnes.
“Eastern Steel is in the process of establishing Malaysia’s first integrated hot-rolled coiled plant with 2.7 million tonnes of capacity.
“As of 2022, only hot metal and pig iron have achieved capacity utilisation above the global average of 74% and sustainable threshold of 85%, while other products fall significantly below these levels at less than 51%,” the research house said.
