Posted on 19 Jan 2016
Steel output in the world’s largest producer posted the first annual contraction in a quarter century.
Mills in China, which make half of global supply, churned out less steel last year for the first time since at least 1991 as local demand dropped, prices sank and producers struggled with overcapacity. Crude steel production shrank 2.3 percent to 803.83 million metric tons, the statistics bureau said Tuesday. December output fell 5.2 percent to 64.37 million tons from a year earlier.
Demand is weakening as policy makers seek to steer the economy away from investment and toward consumption-led growth. The economy expanded 6.9 percent last year, the weakest full-year pace since 1990, data showed. Steel output will probably drop 2.6 percent this year, weakening the outlook for iron ore as global miners increase shipments, Citigroup Inc. has estimated.
“This marks the start of declining steel output in China as the economy slows,” Xu Huimin, an analyst at Huatai Great Wall Futures Co. in Shanghai, said by phone. “We’re likely to see more output cuts this year, though the magnitude of declines will be quite similar to 2015. Supply cuts in a glut are a long-drawn process as mills seek to maintain market share.”
Chinese steel demand is also dropping for the first time in a generation, prompting mills to export record amounts of the metal. Shipments jumped 20 percent last year to 112.4 million tons, an all-time high. Excess supply particularly from China has spurred governments across the globe to take steps to protect their home markets.
