In releasing its Short Range Outlook for apparent steel consumption in Tokyo on Tuesday, worldsteel dramatically hiked its outlook for Chinese demand in 2018, largely on the back of a data anomaly. It expects zero growth in 2019 however, as long as China launches no stimulus plan, Kallanish notes.

“There is probable upside to this forecast,” said outgoing worldsteel president Edwin Basson. The forecast is based on two factors. Firstly, China’s steel demand does seem to have reached an inflection point, where demand cannot continue to grow rapidly and will most likely decline over the medium term. It is also premised on a lack of stimulus from Beijing however.

As things currently stand, a slowdown in real estate would balance out support from the infrastructure sector, said Saeed Al Remeithi chief executive of Emirates Steel, the head of worldsteel’s economic committee. While there is some risk from trade tensions, the impact on overall demand is not expected to be large (see separate article). If a stimulus package of some kind is launched however, the forecast for Chinese steel demand in 2019 is likely to be increased, both Basson and Remeithi agreed.

China had already seen a stark revision in its 2018 demand from 736.8 million tonnes to 781mt. That was largely due to the impact of the closure of induction furnaces however. China has made significant progress in its plans to close down 140 million tonnes/year of induction furnace steelmaking capacity. This had an impact of cutting around 60mt of steel output from induction furnaces in 2018, Basson said. As this output was not counted previously, and the output that replaced it is taken into consideration, this led to a rapid nominal growth in demand in 2018.

Going forward, China is unlikely to return to a path of aggressive exports as it will continue to make progress in controlling capacity. Chinese leaders understand that China has nothing to gain from disrupting markets, Basson added.