“Steel demand from China’s major consumers is expected to increase by 2021,” Baosteel said on April 27, further challenging the government to keep output lower than the same period last year, especially when it rose 37 million tons in the first quarter while the Government is aiming to reduce steel production by 2021 for environmental reasons.
Baosteel said while reducing steel production is inevitable to reduce carbon emissions, production will drop very slowly after peaking. The company did not specify when the production is expected to peak.
Some market sources remain skeptical that China’s steel production will decline in 2021, due to increased demand from domestic and foreign markets and tight global supply.
Some sources said that China’s production reduction, if any in 2021, will most likely happen in the second half of the year as resuming operations at steelmakers abroad will increase supply in the market, while credit tightening in China could hinder new home startups.
In addition, the recovery of overseas manufacturing plants will reduce demand for Chinese manufactured goods.
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According to Baosteel, the development and implementation of low-carbon technologies are demanding a lot of money for steelmakers, while the transaction costs of carbon emission quotas will only grow higher and higher in the near future. That means smaller and financially weaker steelmakers will be either acquired by the stronger ones or removed from the market, the company said.
Total crude steel production of China’s top 5 steel producers accounts for about 26% of China’s total crude steel production, lower than the 40% target set by the Ministry of Industry and Information Technology.
However, Baosteel said the industry’s consolidation process will accelerate dramatically in the coming years and reach its target of 40% by 2025, as required.
Baosteel’s parent company – Baowu Group – will continue to expand mainly through acquisitions after producing 115 million tons of crude steel by 2021, according to the listed company.
Baosteel performance
Baosteel’s net profit increased 1% year-on-year to 12.68 billion Yuan ($ 1.96 billion) in 2020. Baosteel’s first quater in 2021 net profit rose to 5,369 billion Yuan, up from 1,541 billion yuan over the same period in 2020.
Baosteel sold 45.98 million tons of steel products by 2020, while plans to increase sales to 49.44 million tons by 2021. In first quater, the company sold 12.01 million tons of steel, up 13% year-on-year.
The company will put into operation a third blast furnace and downstream steelmaking facilities at steel mills in Zhanjiang city, Guangdong province, southern Guangdong province in June, which will lift the workforce iron and crude steel capacity to 4.02 million tons / year and 3.6 million tons / year.
Information resource: Satthep.net
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