Steel production in China is growing steadily despite factory closings

Just a few years ago, market reviews from major iron ore producers Rio Tinto and BHP regularly stated that they expected China's steel production to reach 1 billion tonnes by the end of the next decade.

It sounded like an incredible amount of steel, especially when China's growth trajectory was on the decline. In addition, such a forecast seemed unrealistic, given that steel production in China fell by 2.3% in 2015 to just under 804 million tons.

For many Chinese government officials and steel analysts, the argument went something like this: steel consumption peaked in 2014, Beijing cut steel production as part of its supply-side reform program, and the country moved to higher consumption-oriented costs. an economy based on cleaner technologies.

In short, the era of massive industrial build-up, so-called "ghost towns," toxic assets, rising debt and surplus that China was known for was coming to an end. China has entered a new era of robust growth, and its blue sky pollution control policies are at the forefront. Under these conditions, surely there was no way for steel production to ever reach 1 billion tons?

So it came as a surprise that steel production has increased by 15% over the past two years. China produced a record 928 million tonnes of steel in 2018, up 6.6% from a year earlier, according to the World Steel Association. Most of the forecasts for the beginning of the year envisaged a 1% -2% increase in production. Perhaps the 1 billion tonne target was not so far-fetched, as it would take less than 1% growth over the next 10 years to reach that level. Indeed, China kicked off 2019 with a leap forward, with February steel production of 71 million tonnes up 9.2% from the previous year.