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Steel: The China factor

Sep 12, 2008

In last article, we saw key stats of the global steel market, let us see the same for China, which has emerged as the highest steel producing and consuming country backed by robust growth in its fixed assets investments over the years. Production: Steel production in China grew by around 16% to reach a level of 489 m tonnes in 2007. It almost constituted around 36% of total steel production in world in 2007. However, it showed a decline in growth rate achieved as compared to 2006 (27%) and 2005 (26%). China steel production has grown at a CAGR of 22% between the period 2003 and 2007. It remained the principal driving force behind the strong production growth in world. Without it, world steel production would have grown at meager 3% during the same period i.e. 2003 to 2007.

Consumption: Steel consumption in China has increased by around 13% to 408 m tonnes in 2007. It constituted around 34% of the world steel consumption in 2007. The increase in steel consumption can be attributed to growth in sectors like construction, automobile, real estate, consumer durables, oil and gas, railways and shipping & container industry. The steel consumption has grown at a CAGR of 13% between the period 2003 and 2007. It also remained a principal driving force behind the increased consumption growth in world. Without it, world steel consumption would have grown at a rate of 6% only (between 2003 and 2007). The per capita steel consumption in China is 309 kg, higher than the world's 182 kg in 2007. The per capita consumption in China has grown at a CAGR of 18% between 2000 and 2007.

Exports: China's steel exports grew by 33% in 2007 to reach a level of 69 m tonnes. It emerged as a net exporter of steel in 2006. However, the growing exports from china are expected to decline in the medium term as a consequence of exports tax put by Chinese government on various steel products since the beginning of 2008.

It is estimated that in order to control the oversupply situation in the domestic market and make the industry more profitable, the steel making capacity in the country is likely to be brought down by 55 MT by 2010.

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