Page 236 - 2019 White Paper on the Business Environment in China
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9 White Paper on the Business Environment in China
to data from the Energy Information Administration 742-million. The projection for China’s steel consumption
show. According to Bloomberg Intelligence analyst implies a leveling in China’s steel intensity—the volume
Andrew Cosgrove, the total value of US coal exported of steel consumed per person—and results in the
to China in 2017 was about US$395 million, based on an country following a different trajectory from South
average price of US$122 per ton. About 90 percent was Korea and Japan. Unlike these countries, which consume
metallurgical coal, which is used to make steel, he said large amounts of steel in industries like automobile and
(Bloomberg, China Considers). shipbuilding, China’s development path is not expected
to follow the same scale of steel-intensive export growth
Asian seaborne coal imports are expected to rise by (Bloomberg, World’s Top).
400 million tons from current levels by 2030 if all of the
planned coal-fired plants across Asia are actually built; Following massive investments in Australia and Brazil,
however, the trend is clear that developed nations oversupply was expected to hit dwindling demand on
are cutting back on planned and proposed coal-fired the back of a cooling Chinese property market and an
generation and turning away from the mineral due environmental crackdown on excess steel production.
to environmental concerns. An optimistic forecast While oversupply did not manifest itself as a flood,
fails to account for political pressure away from coal. producers showed remarkable market discipline. In part,
It is likely that Asian countries planning on building Chinese efforts to reduce excess capacity boosted steel
plants powered by imported coal will come under prices by supporting finished steel prices and, hence, steel
mounting pressure from environmental activists who producers’ margins, rather than impact iron ore demand.
have become increasingly sophisticated in targeting Constraints on steel producers tightened the domestic
how these coal plants are financed and insured. The steel market, and demands that steel companies and
coal industry obviously does not fully understand the coke producers meet ultra-low emissions targets have
array of forces now being employed against it as they further supported prices for top-grade material (Burns).
continue to chant the mantra that cheap and reliable
coal is the only way to electrify the masses of people RBC Capital Markets was not convinced of a total
will without power (Russell). staying power for iron. RBC analysts Tyler Broda and
Barbora Baluskova noted in July 2018 that the Chinese
Iron economy had stayed resilient through the first months
of the year, but the combination of an expected cyclical
Australian experts predicted at the beginning of year slowdown, increasingly challenging monetary conditions
that iron ore prices would drop to an average US$51.5 a and increasing risks of tariffs to the wider economy
ton in 2018, down 20 percent from 2017, because of rising pointed to a slowdown in Chinese steel demand in the
global supply and moderating demand from top importer second half of the year. As China comes off its previous
China as its steel sector shrinks. Prices will continue to stimulus push, the key infrastructure sector—around
decline into 2019. The lower prices would reflect growing 23 percent of steel consumption—would likely to see
supply from low-cost producers and moderating demand an acceleration of the year-on-year decline in spending,
from China’s steel industry. China is in the process of closing even with the 2018 announced measures (Scutt).
ageing, high-polluting steel mills and induction furnaces
to curb overcapacity in the sector. Iron ore rapidly fell into
a bear market as worries about a trade war between the US
and China added to concerns about expanding supply and
cutbacks in China’s steel industry. UBS global commodity
analyst Lachlan Shaw said a full-blown trade dispute
between the US and China would see commodity prices
plunge (Reuters, Australia Forecasts).
China’s iron ore imports were forecast to ease from
1.08-billion tons in 2018 to 1.04-billion in 2023. At the
same time, nationwide steel output would fall from
832-million tons in 2018 to 805-million in 2023, while
local steel usage contracts from 772-million tons to
236
to data from the Energy Information Administration 742-million. The projection for China’s steel consumption
show. According to Bloomberg Intelligence analyst implies a leveling in China’s steel intensity—the volume
Andrew Cosgrove, the total value of US coal exported of steel consumed per person—and results in the
to China in 2017 was about US$395 million, based on an country following a different trajectory from South
average price of US$122 per ton. About 90 percent was Korea and Japan. Unlike these countries, which consume
metallurgical coal, which is used to make steel, he said large amounts of steel in industries like automobile and
(Bloomberg, China Considers). shipbuilding, China’s development path is not expected
to follow the same scale of steel-intensive export growth
Asian seaborne coal imports are expected to rise by (Bloomberg, World’s Top).
400 million tons from current levels by 2030 if all of the
planned coal-fired plants across Asia are actually built; Following massive investments in Australia and Brazil,
however, the trend is clear that developed nations oversupply was expected to hit dwindling demand on
are cutting back on planned and proposed coal-fired the back of a cooling Chinese property market and an
generation and turning away from the mineral due environmental crackdown on excess steel production.
to environmental concerns. An optimistic forecast While oversupply did not manifest itself as a flood,
fails to account for political pressure away from coal. producers showed remarkable market discipline. In part,
It is likely that Asian countries planning on building Chinese efforts to reduce excess capacity boosted steel
plants powered by imported coal will come under prices by supporting finished steel prices and, hence, steel
mounting pressure from environmental activists who producers’ margins, rather than impact iron ore demand.
have become increasingly sophisticated in targeting Constraints on steel producers tightened the domestic
how these coal plants are financed and insured. The steel market, and demands that steel companies and
coal industry obviously does not fully understand the coke producers meet ultra-low emissions targets have
array of forces now being employed against it as they further supported prices for top-grade material (Burns).
continue to chant the mantra that cheap and reliable
coal is the only way to electrify the masses of people RBC Capital Markets was not convinced of a total
will without power (Russell). staying power for iron. RBC analysts Tyler Broda and
Barbora Baluskova noted in July 2018 that the Chinese
Iron economy had stayed resilient through the first months
of the year, but the combination of an expected cyclical
Australian experts predicted at the beginning of year slowdown, increasingly challenging monetary conditions
that iron ore prices would drop to an average US$51.5 a and increasing risks of tariffs to the wider economy
ton in 2018, down 20 percent from 2017, because of rising pointed to a slowdown in Chinese steel demand in the
global supply and moderating demand from top importer second half of the year. As China comes off its previous
China as its steel sector shrinks. Prices will continue to stimulus push, the key infrastructure sector—around
decline into 2019. The lower prices would reflect growing 23 percent of steel consumption—would likely to see
supply from low-cost producers and moderating demand an acceleration of the year-on-year decline in spending,
from China’s steel industry. China is in the process of closing even with the 2018 announced measures (Scutt).
ageing, high-polluting steel mills and induction furnaces
to curb overcapacity in the sector. Iron ore rapidly fell into
a bear market as worries about a trade war between the US
and China added to concerns about expanding supply and
cutbacks in China’s steel industry. UBS global commodity
analyst Lachlan Shaw said a full-blown trade dispute
between the US and China would see commodity prices
plunge (Reuters, Australia Forecasts).
China’s iron ore imports were forecast to ease from
1.08-billion tons in 2018 to 1.04-billion in 2023. At the
same time, nationwide steel output would fall from
832-million tons in 2018 to 805-million in 2023, while
local steel usage contracts from 772-million tons to
236
