Steel output to taper off in 2020

China's steel consumption is expected to hit a record in 2019, and this would then be followed by a slight decline in demand in 2020, a new report by the China Metallurgical Industry Planning and Research Institute released on Thursday said. The report added that the country's crude steel output is also expected to fall in 2020 from 2019.

The country's steel consumption is estimated to hit 886 million metric tons this year, higher by 7.3 percent year-on-year, while demand is forecast for 2020 is seen at 881 million tons, down 0.6 percent from the level in 2019.

Crude steel output in 2019 and 2020 are expected to reach 988 million tons and 981 million tons, respectively.

"The unexpected steel consumption growth in 2019 is mainly due to an increase in real estate and infrastructure investments, while downstream industries such as machinery, energy, and home appliance also contributed to the growth under the background of a stable growing domestic economy," said Li Xinchuang, president of the institute.

In 2020, demand from some downstream industries including construction, automobile and shipbuilding is seen to likely fall. Demand from the machinery sector is likely to remain stable, while demand from the energy and home appliance sectors is seen rising, he said.

The report predicted steel consumption in the construction industry would be 475 million tons in 2020, down 0.6 percent from this year. The figure for 2019 is seen hitting 478 million tons, up 11.2 percent year-on-year.

The automobile industry is expected to consume 50 million tons of steel in 2019, down 7.4 percent from 2018. Demand in 2020 is seen slipping further to 48.2 million tons, down 3.6 percent year-on-year.

Demand from the shipbuilding sector is expected to see the sharpest year-on-year decline of 11.5 percent. The industry is expected to consume 11.3 million tons of steel this year, up 3.7 from last year, but the figure is expected to slide to 10 million tons in the following year due to the impact of trade disputes and geopolitical uncertainty.

The machinery industry is estimated to consume 142 million tons of steel in 2019, an increase of 1.4 percent year-on-year, and is forecast to maintain that demand in 2020.

The home appliance sector's demand for steel, however, is estimated to climb 3.7 percent year-on-year to reach 14 million tons next year. Consumption this year is estimated to increase 8 percent from last year to stand at 13.5 million tons.

Demand from the energy industry is also forecast to grow about 1.5 percent year-on-year to reach 34.5 million tons in 2020. The estimated consumption of the sector in 2019 is 34 million tons, higher by 3 percent year-on-year.

The report predicted iron ore demand in China at 1.225 billion tons in 2020, compared to 1.264 billion tons in 2019. Pig iron output in 2020 and 2019 is seen at 775 million tons and 800 million tons, respectively.

Qu Xiuli, deputy head of the China Iron and Steel Association, said at an industry forum in November that China will continue to rein in unwanted steel capacity, especially metal that is substandard and contributes to pollution.