The world’s largest steel market is about to go into reverse. Production in China will peak in 2018 and then shrink next year as local demand drops, according to forecasts from the Australian government, which says the shift will add to headwinds for core ingredient iron ore.
Mainland steel production is “forecast to peak in 2018,” the Department of Industry, Innovation & Science said in a quarterly report on Tuesday. After topping out at 886 million metric tons, output is expected to drop to 861 million tons in 2019 and hit 842 million in 2020, the department said. Over the same time frame, local demand is seen contracting by 34 million tons.
China accounts for half global steel output, and trends in its mammoth industry shape the worldwide market. This year, the sector has boomed with local mills — the largest buyers of seaborne iron ore — making record volumes as Beijing’s drive to curb overcapacity and fight pollution aids margins.
The Australian government’s view that China’s at peak steel contrasts with outlooks from some of the country’s biggest miners, including BHP Billiton Ltd.
The expected drop-off in mainland production is “driven by a suite of government policies,” including stricter environmental regulations, supply-side reforms reducing some loss-making capacity, and a push to cut debt, according to the department.
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