Nippon Steel Expect China Steel Market to Grow More

Nippon Steel’s Shanghai office manager Shingo Hayama provided an overview that steel consumption in China could keep the mass volume though the demand growth has currently slowed down, at the coverage by Japan Metal Bulletin. He pointed out China’s domestic raw steel output capacity was estimated at 900 million tonnes per year as of the end of December 2011 and seemed surplus by 200 million tonnes or more against the current demand size. However, he told steel inventory is still decreasing despite of high output.

Nippon Steel forecasts Chinese automobile output could reach 20 million units in 2012 compared with 18.42 million units in 2011. Mr. Hayama said local automakers show strong demand for high tensile steel and high quality automotive galvanized steel as well as overseas car makers. Home appliance production is weak especially for air conditioners and laundries, impacted by slow investment for real estates in China and economic deterioration in Europe.

Mr. Hayama said shipbuilders’ new order receipts halved in 2011 and then vessel construction would decrease largely. Meanwhile, he analyzed, in-land demand maintains steady for industrial machines and infrastructure constructions are stable.

Chinese steel production hit the monthly record of 61 million tonnes in March 2012, which is annualized at around 730 million tonnes. Mr. Hayama pointed out more than 40% of major 77 members of China Iron and Steel Association posted monthly loss in January due to higher raw material cost and lower steel selling price. He suggested steel makers should improve selling prices for profitability.

Nippon Steel tries to keep the sales share of automotive steel sheet in China through the galvanized steel making joint venture with Baosteel. Mr. Hayama said Japanese automakers currently purchase 70-80% of steels and other materials from local industry for higher cost competitiveness.

Another joint venture for tinplate making in Guangzhou is enjoying stable sales for beverage and food cans. Steel pipe making joint venture in Wuxi and bar fabricating joint venture in Suzhou are increasing productions for automobiles to follow Chinese market growth. He said Nippon Steel tries to cultivate inland China market through tinplate making joint venture with Wuhan Iron & Steel Group, which recently launched the plant construction.

Mr. Hayama also referred to Nippon Steel’s sheet pile export from Japan to China. He told Wuhan Iron & Steel recently started sheet pile production but the local makers’ movement could support sheet pile adoption by local users. He expects sheet pile demand would increase for flood control and subway construction as well as for railway.