The steel industry will see both supply and demand growth slow in 2012, according to a recent report, which analysts have attributed to the slowdown in the housing market and completion of infrastructure projects that were started as part of the 2008 economic stimulus package.
Steel consumption for 2012 will be around 688 million tons, up 5.32%, while total steel output will reach 717 million tons, up 4.51%, according to a report by Guosen Securities. Both are at a slower growth rate than seen in 2011.
"The slowdown is mainly due to a decrease in construction of infrastructure projects and the cooldown in the housing market," Liu Qiong, an analyst from consulting firm Steelhome, told the Global Times.
Liu said many big infrastructure projects that were started in the spate of construction that was part of the government's 2008 economic stimulus program have been completed, resulting in a significant drop in demand for steel. "Demand for plate steel is also diminishing due to slowing growth in sectors such as shipping and automobile production".
The most active steel rebar futures contract, which serves as a benchmark for domestic steel prices, has fallen 13.4% this year.
Liu said the situation was compounded by record-high steel output in the first 10 months of the year, resulting in an oversupply.
Total fixed asset investment in the industry in the first 10 months of the year grew 18.9% YoY, 17.3 percentage points higher than growth in the same period of 2010, according to statistics given by a government official at a recent industry conference.
Hu Hao, an analyst from Galaxy Securities, said in 2011, steel output was 10.6% higher than consumption, and the situation will worsen next year