Affected by various factors, the total demand for steel in China will steadily increase in 2023, with a demand structure where external demand is significantly stronger than domestic demand; The continued release of steel production capacity has driven a significant increase in iron ore imports and domestic production; The social inventory of steel and smelting materials remains low.

1、 Stable growth in total demand for steel

In 2023, most of the main related indicators in the Chinese steel market showed a growth trend. According to statistics, the GDP in the first three quarters of 2023 increased by 5.2% year-on-year, and it is expected that the annual GDP growth rate will be over 5%.

From January to October 2023, the added value of industries above designated size in China increased by 4.1% year-on-year, with an expected annual growth rate of no less than 4%. In industrial production, the equipment remanufacturing industry, which consumes a great deal of steel intensity, has seen a year-on-year growth rate that exceeds the overall industrial growth rate. In the important steel consuming industry, the national automobile production from January to October 2023 was 23.663 million units, a year-on-year increase of 4.9%. It is expected that the national automotive industry will exceed expectations by 2023, with total sales expected to reach 29 million vehicles, setting a new historical high. According to statistics from the China Shipbuilding Industry Association, the national shipbuilding completion volume from January to October 2023 was 34.56 million deadweight tons, a year-on-year increase of 12%. It is expected that the completion volume of Chinese steel vessels will also reach a historic high in 2023.

In 2023, China will continue to introduce measures to stabilize growth, which will be effective in succession, leaving the growth of fixed assets investment unchanged. According to statistics, from January 2023 to October 2023, the national fixed assets investment (excluding farmers) increased by 2.9% year on year, including infrastructure investment, which increased by 5.9% year on year. Considering the accelerating trend of month on month growth, it is expected that the annual fixed assets investment will reach 3%. Among fixed assets investment, real estate investment continued to be weak, with a year-on-year decline of 9.3% in the first 10 months, which became the biggest drag on the growth of steel demand throughout the year.

Based on this calculation, the total demand for steel in China (including exports, the same below) in 2023 will increase by more than 3% compared to the previous year.

2、 The export momentum of steel is very strong

In the total demand structure of steel in China in 2023, the export momentum is very strong. According to statistics, the national steel export volume from January to October 2023 was 74.732 million tons, a year-on-year increase of 34.8%. It is expected that the annual steel export volume will be around 90 million tons, an increase of 30% compared to the previous year.

Moreover, China's indirect steel exports also saw a significant increase in 2023. According to statistics, the export value of mechanical and electrical products in China increased by 2.8% year-on-year in the first 10 months of this year, accounting for 58.5% of the total export value. The export value of automobiles increased by 88.5% year-on-year.

There are two main factors contributing to the strong growth of China's steel exports in 2023: firstly, the production of major steel producing countries in the world has shrunk, with the crude steel production of the European Union (27 countries) decreasing by 7.1% from January to October, and the substitution function of China's steel products has been enhanced; Secondly, Chinese steel products have lower prices and competitive advantages. The depreciation of the RMB against the US dollar for a period of time has further enhanced this price competitive advantage.

The large-scale export of Chinese steel and steel consuming products in 2023 has become an important engine driving the stable growth of China's total steel demand, completely offsetting the negative impact of the decline in domestic real estate investment and the shrinking demand in related fields.

3、 The release of steel production capacity drives a significant increase in iron ore resources

The stable growth of total steel demand, coupled with a significant increase in profits from steel products, provides a friendly environment for the release of domestic steel production capacity. According to data from the National Bureau of Statistics, from January to October 2023, the national black metal smelting and rolling processing industry achieved a total profit of 26.67 billion yuan, a year-on-year increase of 37%. The release of domestic steel production capacity has driven a significant increase in smelting raw materials such as iron ore. According to statistics, from January to October 2013, China imported 97.5842 million tons of iron ore sand and concentrate, a year-on-year increase of 6.5%. During the same period, domestic iron ore production also saw a significant increase, far exceeding the growth rate of iron ore imports. Stimulated by the release of domestic steel production capacity and high prices, it is expected that the high-level growth trend of new iron ore resources throughout the year will not change.

4、 Social inventory levels continue to remain low

Affected by factors such as stable growth in total demand, inhibition of capacity release, and the "fast in and fast out" business strategy of traders, the social inventory level in 2023 is not high and relatively low. According to monitoring data from Lange Steel Network, the national steel social inventory index was 8.342 million tons on November 24, 2023, a continuous decline of only 4.8% compared to the same period last year for seven weeks; According to statistics from the China Iron and Steel Industry Association, the steel inventory of key steel enterprises in China was 15.3299 million tons in mid November 2023, a decrease of 11.4% compared to the same period last year.