Steel sector to remain resilient in 2019, says expert

Steel demand will remain stable in 2019 backed by increased infrastructure investment, amid lingering worries that the influence of trade tensions on the world's largest steel-maker may shake up the global market, an expert said.

"We are confident about China's steel industry given its great market potential and the resilience of China's economy," Yu Yong, head of the China Iron and Steel Association, said at an industry forum.

"The increased infrastructure investment, together with rebounded growth of ship production and manufacturing, will lead to a slight increase in steel demand. Meanwhile, steel demand in the sector of machinery and home electric appliances will likely remain stable," Yu add.

The comments came as the country saw a 3.7 percent year-on-year growth of infrastructure investment (excluding electric power) in the first 11 months of 2018. The growth rate for the new year is forecast to be higher, according to Yu.

Yu further noted that steel demand in car manufacturing is uncertain as the outlook for car sales in the new year will largely depend on policies to boost consumption. The demand for steel in the real estate sector, however, may shrink as investment slows and construction declines.

Yu's positive views about China's steel prospects contrast with the Worldsteel Economics Committee's predictions. The committee said no growth in China's steel demand in 2019 is likely to make the world steel demand growth drop to 1.4 percent from 3.9 percent.

"But challenge endures for the country's steel industry as new economies spring up," Yu added. That would include a drop in demand for steel in China's growing emerging sectors, and rising requirements for steel quality from manufacturers in traditional sectors, Yu explained.

Other challenges in China's steel markets lie in the rising cost of raw materials, financing difficulties and tightening environmental regulations, according to Yu.

To better tackle the challenges, more measures are expected to be rolled out from steel companies.

Take the country's major Ansteel Group Corp as an example. The group said at the forum it would continue with its reforms in operational mechanisms to enhance its productivity.

Such reforms have led to a surge in sales of steel, which are nine times higher than that before the reforms began, the group said.

Introducing new operational mechanisms for State-owned enterprises has proved an effective way to raise productivity, said Ma Jun, director of the Enterprise Research Institute under Development Research Center of the State Council.

"Other measures include further encouraging the mixed ownership reform and a more relaxed regulatory environment from the government," Ma said.

Yu's predictions follow stable growth in the steel industry in 2018. According to the China Iron and Steel Association, the nation produced 708 million metric tons of pig iron, 857 million tons of crude steel, and over 1 billion tons of steel.

Such production has generally met market demand, Yu said.

Meanwhile, the last year has seen an overall stable price for steel, despite a fall in November due to weakening market expectations.

"Our member steel companies have seen good business performance last year," said Yu. According to him, the member companies generated revenue totaling 3.76 trillion yuan ($556 billion) in the first 11 months of 2018, up 14.17 percent year-on-year. Their profit reached 280 billion yuan during the same period, up 63.54 percent compared with the same period in 2017.