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China: Steel Consumption Declines First Time In Three Decades

  • Written by Syndicated Publisher No Comments Comments
    May 20, 2015

    Looking for signs of a global recovery that will lead export growth? If so don’t look at China. Reuters reports China’s Annual Steel Consumption Drops for First Time in Three Decades.

    China’s apparent crude steel consumption fell for the first time in three decades in 2014, data from an industry association showed, a further indication of how the country’s economic slowdown is hurting industrial demand.

    A decline in the use of steel in China, which is both the top consumer and producer of the alloy, will dent iron ore prices that have already been roiled by a global oversupply.

    Spot rates of the steelmaking ingredient are currently mired near a 5-1/2 year low $65.60 per tonne.

    China’s apparent crude steel consumption fell 3.4 percent from a year ago to 738.3 million tonnes in 2014, according to calculations published by the China Iron and Steel Association (CISA) on Thursday.

    Official data shows China’s power output growth fell to a 16-year low last year, while coal output likely dropped for the first time in more than a decade.

    China’s 2014 steel output rose 0.9 percent to a record 822.7 million tonnes over the year, data showed.

    “Affected by overcapacity, it is unlikely there will be any turnaround in oversupply in the steel product market or any big recovery in prices,” CISA said.

    Painful Rebalancing

    This is all part of China’s painful rebalancing process that is really just getting started. Commodity exporters like Australia and Canada are in the cross hairs.

    Prices may or may not stabilize here, but they are highly unlikely to shoot higher and stay higher. China’s transition from infrastructure and housing to consumer consumption will take many years. And China’s GDP will slowly sink (far more than most believe possible) until the process is complete. Two percent growth, down from seven is along the lines of what I have in mind. Of course, that presumes one believes China is really growing at seven percent.
    Read more at http://globaleconomicanalysis.blogspot.com/2015/05/steel-consumption-in-china-declines_14.html#mcD225HMQBocBhF6.99

    Images: Flickr (licence attribution)

    About The Author

    Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.  Visit Sitka Pacific’s Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

    You are currently viewing my global economics blog which typically has commentary every day of the week. I am also a contributing “professor” on Minyanville, a community site focused on economic and financial education.  Every Thursday I do a podcast on HoweStreet and on an ad hoc basis contribute to many other sites.

    When not writing about stocks or the economy I spend a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com.
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