A respected industry forecaster has raised concerns about the future of steel demand in China, suggesting that the peak may have already occurred. The World Steel Association (WSA) has predicted a potential decline in Chinese steel demand from 2025 onwards, which could have significant implications for Australian investors due to the country’s heavy reliance on iron ore exports to China.
The WSA’s annual demand outlook for the coming year indicates that Chinese steel demand and production could come under pressure both domestically and externally, potentially resuming the decline that began in 2020. This development is particularly worrisome for Australian investors and governments, as iron ore exports to China play a crucial role in driving economic growth and tax revenues.
China’s steel industry is already feeling the effects of reduced demand, primarily due to a downturn in the property sector. The government is expected to resume active monitoring of supply and demand after neglecting it in 2023 to facilitate a rebound from stringent COVID-19 lockdowns.
While global steel demand is expected to see a modest increase in the coming years, concerns remain about China’s slowing real estate investments and infrastructure growth. The WSA anticipates a decline in Chinese steel demand in 2025, with a predicted 886.7 million tonnes, significantly lower than the peak demand observed in 2020.
Despite growth prospects in regions like India, risks such as geopolitical tensions and persistent inflationary pressures cast shadows on the steel market’s future trajectory. The WSA warns of “significant risks” that could potentially slow or derail the ongoing economic recovery, underscoring the need for close monitoring of the steel industry in the coming years.