"Steel Demand Remains High... This Year's Production Expected to Surpass Last Year's"
[Asia Economy Reporter Kim Suhwan] Although Chinese authorities plan to reduce this year's crude steel production compared to last year to address environmental issues, foreign media reports suggest that the government's plan may not be easy to implement.
On the 1st (local time), CNBC reported, "Experts point out that China's plan to reduce crude steel production this year compared to last year is practically impossible."
The steel industry has been identified as one of the main culprits of environmental pollution in China, accounting for up to 20% of the country's total carbon emissions. Accordingly, the Chinese government has announced a policy to strongly regulate the steel industry to achieve the goal of a carbon-neutral society by 2060.
However, despite these government regulatory policies, experts analyzed that it would be difficult to reduce crude steel production as originally planned.
According to Wood Mackenzie, China's crude steel production in the first half of this year increased by 12% compared to the same period last year.
Experts predict that crude steel production will decrease in the second half of this year but will still be higher than last year's level. Paul Bartholomew, an analyst at S&P Global Platts, said, "China's crude steel production is expected to increase by about 9% compared to last year."
Wood Mackenzie also stated, "China's government's plan to reduce crude steel production compared to last year is practically impossible."
CNBC reported that especially with many private steel companies existing in China and steel demand still high, it will not be easy to reduce crude steel production solely through government regulations.
Bartholomew said, "If crude steel production is artificially limited, it will drive up the price of steel products," adding, "This becomes a factor that encourages private steel companies aiming to maximize profits to produce more crude steel."
Ultimately, analysts say that the only way for the Chinese government's plan to be realized is to reduce steel demand itself.
Bartholomew said, "Focusing on reducing steel demand is the best approach," but also noted, "Such policies could ultimately have a negative impact on the economy."
Wood Mackenzie analyzed, "Regulating real estate or construction companies that use steel products can reduce steel demand," but added, "However, the fact that both crude steel production and steel product prices are high means that demand itself is fundamentally high."
Some expect that demand will gradually decrease starting in the second half of this year.
One expert said in an interview with CNBC, "Recently, the construction market in China has begun to slow down, so steel demand may shrink in the second half of this year," but predicted, "Nevertheless, it is highly likely that this year's crude steel production will not fall below last year's level."
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