China's steel production accelerated in the second half of the year

In the first half of this year, China's steel production continued to grow. According to statistics, from January to April, China's pig iron output was 277.99 million tons, an increase of 1.3% year on year; crude steel output was 319.46 million tons, an increase of 1.3%; according to the latest statistics of China Iron and Steel Industry Association, the average daily crude steel output of key steel enterprises in late May 2020 was 2.0925 million tons, approaching the historical peak (2.105 million tons) in mid September 2019, an increase of 121 tons in ten days on month, an increase of 0.58%. It is expected that the stable growth trend of the output of pig iron and crude steel in the first half of the year will not change, with the year-on-year growth rate of about 2%.

Looking forward to the situation of China's iron and steel production in the second half of the year, the growth level is expected to improve. The annual crude steel output will exceed 1 billion tons for the first time, an increase of more than 3% over the previous year.

In the second half of this year, China's iron and steel production accelerated mainly driven by the following three forces:

The first is strong domestic demand. Since this year, despite the impact of the "epidemic", the domestic demand for iron and steel is still growing steadily. According to the statistical data, the apparent consumption of crude steel in China from January to April 2020 is 302.18 million tons, up 2.5% year on year. It is estimated that the apparent consumption of crude steel in the first half of the year will not be less than 450 million tons, and the year-on-year growth rate should also be around 3%.

Secondly, export demand will improve. Due to the severe impact of the epidemic, the export volume of steel products in China fell by 14% year-on-year from January to May this year, with a drop of 27% in the first two months. This situation is expected to improve in the second half of the year.

Finally, more new capacity will be replaced. In general, capacity is the basis of production. In recent years, in the name of capacity replacement, a lot of advanced capacity has been added in China, many of which will be put into production in the second half of this year, which makes the engine of steel production stronger in the second half of this year. At the same time, in the first half of this year, the national steel sales price continued to rise, and the profit level per ton of steel was not low, which would also stimulate the steel enterprises to actively produce, improve the capacity utilization rate, and achieve greater steel production in the second half of this year.