In a recent international metallurgy and mineral products conference held in 2013, Zhang Changfu, vice president of the China Iron and Steel Industry Association, highlighted that the Chinese steel market is entering a phase of rational adjustment. He pointed out that the era of double-digit growth in the steel sector is over, and the market will now see more moderate development. According to his analysis, high production capacity, rising costs, and low prices are expected to become the new normal for the industry.
Zhang Changfu emphasized that the steel production growth rate is likely to stabilize around 2% to 3%, with crude steel output remaining between 700 million and 800 million tons for an extended period. While steel prices may rise slightly, a sharp rebound is unlikely. Similarly, the iron ore market is expected to remain relatively loose, with no strong fundamentals supporting significant price increases.
Zhang Ping, former director of the National Development and Reform Commission, noted that urbanization remains a key driver of China’s economic growth. In 2012, the urbanization rate reached 52.6%, and it is expected to grow further to 53.37% in 2013. Looking ahead, China's urbanization is projected to reach 65% to 70% by 2030, adding hundreds of millions of people to urban areas—equivalent to the population of the United States.
This massive urban expansion will significantly boost domestic demand, particularly in sectors like construction, infrastructure, and manufacturing. Experts estimate that over the next decade, China could add about 400 million urban residents, requiring approximately 40 trillion yuan in fixed-asset investment. This translates to an annual increase of 4 trillion yuan in investment, fueling continued demand for steel.
Infrastructure projects, including urban rail and railway construction, are also set to provide substantial support to the steel industry. In 2012, China invested 260 billion yuan in urban rail transit, with projections reaching 280–290 billion yuan in 2013. Railway investment is expected to hit 650 billion yuan this year, marking a three-year high.
Downstream industries such as real estate, machinery, automobiles, and household appliances are major consumers of steel. Zhang Changfu noted that while some sectors like real estate and home appliances show steady growth, others like shipbuilding continue to face challenges due to weak global trade conditions.
The real estate sector, despite recent regulatory measures, is expected to maintain stable growth, supported by government plans to build 6.3 million new housing units. Analysts predict a 17–18% growth in real estate investment in 2013.
The machinery and automotive industries also show positive momentum. In 2012, the machinery sector saw a 12.64% increase in industrial output, while auto production exceeded 19 million units, setting a new record. The automotive market is expected to grow by about 7% in 2013.
However, the shipping and container industries remain sluggish, with declining orders and reduced production capacity. Despite some optimism for a slight improvement in 2013, overall demand is still weak.
Meanwhile, the home appliance industry is undergoing a transition, with a new policy aimed at promoting energy-efficient products. Growth is expected to remain around 10% for both domestic and export markets.
Zhang Changfu also pointed out that China is shifting from an investment- and export-driven economy to a more consumption-based model, leading to a decline in steel demand per unit of GDP. The use of high-strength steel is also reducing overall steel consumption.
Regarding iron ore prices, Zhang explained that the combination of increased global supply and weaker demand has led to a downward trend. Major mining companies are ramping up production, and domestic iron ore supply is also growing. With these factors in place, analysts expect iron ore prices to remain within the range of $120–$130 per ton in 2013.
Zhang urged steel companies to manage their procurement strategies carefully, maintain reasonable inventory levels, and avoid following price trends blindly. At the same time, he called for stronger government oversight to prevent speculation and ensure a fair and transparent iron ore market.
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