Xu Xiaonian, professor of economics at the China Europe International Business School (CEIBS), stated at the recent China Commodities Forum held in Shanghai that the prospects for the Chinese steel industry in 2018 will be less bright.
In his opinion, the significant rises seen in finished steel prices in China in the past year were mainly due to the following three reasons.
First of all, the Central Bank of China had increased the supply of money at the end of 2015 and at the start of 2016, exerting a positive impact on the trend of finished steel prices as of the middle of 2016.
Secondly, steel enterprises’ inventories had hit historically low levels by the end of 2015 as China’s economy faced adjustments in 2014 and 2015, resulting in a round of replenishments by steel enterprises from 2016.
Thirdly, the Chinese government has required steelmakers to implement production cuts as of 2016, aimed at reducing crude steel capacity by 100-150 million mt, and this has pushed up finished steel prices.
Mr Xu said the above three factors will unlikely continue to have the same impact on the Chinese steel industry in 2018, and so he foresees that the prospects for the industry in 2018 will be less bright. He also suggested Chinese steel companies should step up their focus on innovation, creating effective supply which matches demand, which will then never result in oversupply.