Cool Forecast for China Steel in 2017

Cool Forecast for China Steel in 2017

Increasing demand for steel in the second half of 2016 was an anomaly that’s unlikely to be repeated in the coming year, according to industry analysts.

Instead, the forecast is for slower demand growth as well as lower prices for Chinese steel through 2017 – factors that will likely impact breakbulk cargo transport and logistics companies whose business areas include rolled steel, plates and prefabricated steel products.

While crude steel output rose 1.2 percent in 2016, according to a Guangfa Securities report, demand is expected to decline 1.5 percent in the coming year.

Output jumped last year in the face of government directives to cut the industry’s excess capacity by closing underperforming steel mills. Building construction and auto manufacturing companies were among the steel buyers whose businesses did well in the latter half of 2016, pushing steel prices higher, Guangfa said.

But a Changjiang Securities report argued that nationwide cuts in steel factory capacity have also played a role in the overall increase in prices since last September. Now that the cuts have been made and the supply “shock” has worn off, the report said, prices will probably stabilize while output falls.

Chinese government infrastructure spending is expected to help drive steel demand in 2017, Changjiang said, and supply shrinkage early in the year could keep prices relatively high. But the report said the industry in general will face “downside risks to domestic demand” in the coming year.

Photo: Prefabricated steel loading project

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