China’s iron and steel industry has entered a phase of excess production capacity resulting in gluts in production.

Steel consumption will have limited room for further growth. In 2011, except for electrical steels, most of China’s steel exports outstripped imports indicating overcapacity in the country’s iron and steel industry.

Crude steel demand in 2012 is forecast at 700 – 720Mt, up 7% year on year. Demand for crude steel is expected to peak at between 720 – 750Mt between 2012 and 2015. This implies that consumption is likely to see zero growth in the coming years on the basis of consumption nearing the peak by the end of this year.

Due to the decline in the global demand, net exports of steel from China are likely to stand at 30 – 35Mt in 2012.

Blast furnace capacity in the country amounted to 878Mt by the end March 2012. Blast furnaces under construction have a total capacity of 277Mt. Even if all the blast furnaces with a capacity of 400m3 or less were eliminated, the remaining blast furnaces will have a combined production capacity of 1bnt in 2015.

Source: China Metals e-mail