Steel production in China will grow by 4-5% this year

Official forecasts for China's steel production in 2020 range from nearly 1% contraction to 1.2% growth, but Boris Krasnozhenov, an analyst at Alfa Bank, says the country's infrastructure investment will confirm less conservative forecasts, expecting a rise of up to 4% - five%.

China's Steel Industry Planning and Research Institute estimates that China's steel production could decline 0.7% this year from 2019 to 981 million tonnes. Last year, the think tank estimated the country's production at 988 million tons, up 6.5% from the previous year.

Consulting group Wood Mackenzie is slightly more optimistic, forecasting production growth in China by 1.2%.

Nevertheless, Krasnozhenov considers both estimates to be overly cautious.

Steel industry analyst said China's steel production could grow by 4-5% and exceed 1 billion tons this year, based on its forecast for the country's fixed capital investment (FAI).

“FAI dynamics are not 100% correlated with changes in steel production, but the two are often the same,” he said.

In January-November 2019, the country's FAI rose 5.2% year-on-year to 53.37 trillion yuan ($ 7.7 trillion), according to China's National Bureau of Statistics, largely maintaining the same rate of growth throughout the whole year.

And although up to 85% of China's GDP growth is due to the rapidly developing economy of services and personal consumption, the share (FAI) in the gross product is still significant, "Krasnozhenov said.

Last year, the FAI will be up to $ 8.38 trillion, or about 60% of China's GDP. The World Bank estimates that the latter, which will cost $ 13.6 trillion in 2018, could surpass $ 14 trillion in 2019.