MONTERREY, Mexico -- China's demand for steel next year is poised to weaken as domestic industries grapple with the repercussions from the trade war with the U.S.
China's steel demand is projected to grow 1% to 909 million tons in 2020, according to World Steel Association figures, sharply lower than the 7.8% growth forecast for 2019. Speaking to reporters on Monday at the association's annual general assembly in Mexico, Director General Edwin Basson said the prolonged trade war has had a negative effect on China's home industries.
Worldsteel forecasts global demand to grow 1.7% next year to 1.8 billion tons, compared with 3.9% growth projected for 2019. In China, which accounts for a half the total, demand is expected to decline for automobiles and industrial equipment. Global steel demand excluding China is also slowing, with the association forecasting 896 million tons for 2020, up 2.5% from the 2019 forecast but 2.2% lower than its prediction from April.
Despite the softening demand, major Chinese steel-makers plan to continue increasing steel production as the government steps up infrastructure investment. The stimulus aims to prop up an economy facing headwinds from the trade war, but may also further exacerbate a glut in the global steel market.
China's crude steel production rose 9.3% in August to 87.25 million tons, marking 42 consecutive months of growth. Annual output is closing in on a record 1 billion tons. Since the trade war began last year, the global steel market has faced a slowdown in demand and increase in Chinese production. China had been taking steps to reduce excess production from 2016, cutting capacity by 150 million tons over three years.
The increase in production is unrelated to the trade war, Hesteel Group Chairman Yu Yong told Nikkei, saying that it is in response to growing domestic demand. Yet with the decline in domestic demand from automobile production and for industrial machinery, excess steel is starting to be exported abroad, undercutting the market in Asia. For instance, the price of hot rolled coils -- a benchmark for the East Asian export market -- has declined from $640 a ton in October 2018 to about $515, the lowest in 29 months.