Present Situation and Outlook of the Chinese Steel … 1 - CISA - OECD-SA Dec 2014.pdf2014/12/11 1 China Iron and Steel Association Dec. 11, 2014 Present Situation and Outlook of the

2014/12/11

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China Iron and Steel Association

Dec. 11, 2014

Present Situation and Outlook of the Chinese Steel Industry

Crude Steel Prod. Continue to Grow, at a Slower Pace

For Sept, the crude steel production is 67.54mmt, almost no change yoy while the daily

production stays at 2.2513mt.

For the first 9 months, the crude steel production is 618mt, up by 2.3% or 13.9 mt yoy while

the average daily crude steel production stays at 2.2637mmt and the annualized crude

steel production will be 826mt.

136.75

155.57

174.58

187.75

195.78

213.44

226.37

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10000t/Day / Daily Crude Steel Production

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In Sept., apparent crude steel consumption is 59.92mt, down 5.82% yoy

For the first 9 months, ACSC is bout 560mmt, down by 0.9% or 5.16mt yoy

Apparent Steel Consumption Decreases

5838.0 5787.1 5835.9 5960.9

5833.9

6092.0

5694.9

6442.6

6297.1 6189.9

5992.3

25.25

- 1.67

- 6.35

- 4.33 - 3.3

- 1.7 - 1.74 - 2.22 - 1.49

10.02

6.57

7.36

5.06

12.32

9.61

5.16

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- 0.97

- 1.76

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- 5.82

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Apparent Crude Steel Consumption and Growth Rate YoY

ASC (10,000mt） Growth Rate yoy % ）

Steel Export Rise

In Sept., finished steel import stayed at 1.36mt,up by 190,000 t or 16.2％ mom; for the

1st nine months, steel import increased 5% yoy to 11.01 mt.

In Sept., finished steel export increased mom by 760,000 t or 9.8% yoy; for the 1st

nine months, finished steel export increased by 39.3% yoy to 65.34mt.

For the 1st nine months, crude steel (equivalent) export was 57.8mt, up by 19mt yoy.

1. Steel Import and Export

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万吨

Steel Import and Export

Import Export

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For the 1st nine months, finished

steel import from Korea, Japan

and China Taiwan accounted for

90.51%.

For the 1st nine months, finished

steel import from Japan, Korea

and Germany increased yoy

respectively by 2.63%,11.77%

and 18.95%.

2. Finished Steel Import and Export by Country

For the 1st nine months, finished

steel export to ASEAN, Korea

and the Middle East accounted

for 54.2% of the total.

Finished steel export to the EU,

US and China Taiwan grew

swiftly, all above 60％ yoy.

Steel Export Rise (continue)

Japan 42%

Korea 32%

China Taiwan 3%

Germany 4% Others

9%

ASEAN 27%

Korea 15%

Middle East 2%

South America

8%

Rest Asia 8%

EU 7%

Africa 6%

Others 17%

Steel Price Continue to Decline

At end of Sept., the CSPI recorded 86.35 points, down by 4.65 points mom and

14.22 points or 14.14% yoy. The index, which had been below 100 points since

last Oct, was at the lowest level since Jan. 2003.

The average finished steel price for Sept (ex. Tax) dropped by 108 Yuan RMB or

3.55% mom, 314 Yuan RMB or 9.06% yoy.

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Chinese Domestic Finished Steel Price Index

CSPI Composite CSPI Flat CSPI Long

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The Industry Struggling to Break Even

For the 1st nine months, the key steel enterprises recorded a sales revenue of

2.71724 Trillion Yuan RMB, down 0.22% yoy and the profit 19.282 billion Yuan RMB,

up by 71.26% yoy. The sales profit rate is merely 0.71% but up 0.3 percentage points

yoy and the core steel business remained in black.

20.84

- 41.96

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- 17.52 4.78

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亿元 Profit of the Key Steel Enterprises

Main Steel Raw Material Prices Continue to Slide

Imported iron ore price has been lingering around 80USD which fell below 80USD in late

Sept. and rebounded to over 80USD in mid Oct.

Iron ore futures price picked up a little bit in early Oct. but dipped again in late Oct.

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2011 2012 2013 2014

China Iron Ore Price Index CIOPI

CIOPI Domestic CIOPI Import

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Ferrous Smelting

and Processing

359.9 Billion Yuan

Down 5% YoY

Steel Industry FAI

399.9 Billion Yuan

Down 4.35% YoY

FAI New Projects Key

Enterprises

59.8 billion Yuan

Down 15.25% YoY

Ferrous Mining

134.4 Billion Yuan

Up 6.6% YoY

Jan-Sept., 2014

Steel Fixed Asset Investment Shrink Further

Performance of Main Steel Consuming Sectors---Real Estate

1. Investment slow down and inventory increase

Item Jan-Sep

Total YoY

Growth Rate

Change

Total Invest. 6.8751 T

Yuan 12.5% -7.2 pp

Area in

Construction

67.323 T

㎡ 11.5% -3.5 pp

Newly Started

Area

13.1411 T

㎡ -9.3% ＋/-

Land

Purchase

2.4014 T

㎡ -4.6% -1.3 pp

Real Estate Investment Ex. Land Purchase

Area in Construction

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房屋施工面积（万平方米） 增长率（%）

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扣除土地购置费的房地产投资额（亿元）

增长率（%）

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Performance of Main Steel Consuming Sectors---Auto

Production Jan-Sept

1000 Units

Accumulative

yoy

Sept

1000 Units YoY MoM

Automobile 1723 8.1% 201 4.2% 17.1%

Passenger Car 1439 11.3% 173 9.4% 16.4%

Commercial V 284 -5.7% 28 -19.3% 21.1%

2. Auto production and sales grew at a slower pace

%

Auto Production and Sales Growth Rate

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产量 销量

Performance of Main Steel Consuming Sectors:

3. Machine building industry is expected to slow down in general but the sub-sectors are more divided

4. Ship building industry saw revenue grow with two indicators up and one down

Item Finished Tonnage Order in Hand New Orders

Jan-Sept 24.25M DWT 152.51M DWT 48.99M DWT

Growth YoY -6.9% 46.1% 38.0%

Growth Rate Change YoY +19.5 pp -/＋

+51.8 pp

-101.9 pp

Product. Cement Large Tractor M. Tractor Power Generation E. Handy Tools

Jan-Sept. 731000Ton 52000Unit 447000Unit 112.65MKW 189.97MUnit

YoY 0.5% -4.6% -7.4% 12.0% 5.0%

Growth Rate

Change YoY -7.5 pp ＋/- ＋/- -/＋ -/＋

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Performance of Main Steel Consuming Sectors---Appliances

5. Home appliances industry sales revenue growth slowed down with high inventory of the main steel contained products

Item Jan-Sept Growth YoY Growth Rate Change YoY

Home Refrig. 73.89M Unit 1.9% -8.7 pp

Home Air

Conditioner 122.96M Unit 13.9% +5.9 pp

Home Washing

Machine 50.99M Unit -3.8% +/-

Home Freezer 14.15M Unit -2.8% +/-

GDP growth rate, which dropped to 7.3% in the 3rd quarter hitting a 6 year

low，will not likely see decent rebound in the 4th

Crude steel daily production will continue to stand high and over supply

will still be protruding

Apparent crude steel consumption will remain weak in 4th quarter, but

infrastructure investment, ship building and automobile look encouraging

while the other sectors remain flat

Finished steel export will overpass 80 million MT for the whole year

Iron ore price will remain on the downward track while coal price may

stablize or rebound slightly

Finished steel price will remain weak

Short Range Outlook

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Chinese Economy on the Way to “New Normal”

6.6

7.5

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11.2 10.7

10.4 9.8 9.7 9.5 9.3

7.9 7.7 7.6 7.7 7.7 7.6 7.7 7.7 7.4 7.5

GDP Growth YoY from 2009 to 2014 by Quarter

GDP（%）

Chinese Steel Industry on the Way to “New Normal”

One, the “New Normal” of slower growth In 2013，China’s crude steel production growth slowed down to 7.5% and further

dropped to 2.3% for the first nine months 2014 and the domestic steel consumption

stayed flat.

Two, the “New Normal” of structural adjustment Facing the changed economic structure, which drives the demand on high end steel

but have little effect on medium and low end steel products, and escalating pressure

in environmental protection and mitigating excessive capacity, the steel industry

have to embrace green growth emphasizing environmental friendliness, quality and

efficiency instead of merely quantity.

Three, the “New Normal” of macro policy reform and adjustment A series of reform measures announced by the Chinese government will gradually

take effect which will finally create a fair market place for steel enterprises including

equality in law reinforcement, environmental protection, taxation, market order and

resources allocation., etc.

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Pressure in 6 Aspects facing Steel Mills in “New Normal” Period

Weak steel price

bleak economic efficiency due to excessive capacity and over supply;

Hiking financial cost because of inadequate fund of its own, difficult financing on the stock market, high –cost in issuing bond and the rising bank loan rate;

Unstable iron ore supply due to low rate of equity ore

rising environmental protection cost particularly because of lack of investment in the past;

Pressure of rising VAT;

Pressure in steel export due to rising trade frictions and export policy adjustment.

New Opportunities for Steel Industry in “New Normal” Period

New opportunities in restructuring,

transformation and upgrading

New opportunities in reform and innovation

New opportunities in demand structure

change

New opportunities in green steel

development

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resource-saving

environment-friendly

sustainable

innovative

more responsibility

profitable and

globally competitive

Vision of the Chinese Steel Industry in 2020