China Steel’s Demand May Rise as Much 25% by 2015, Group Says

Steel demand in China, the world’s biggest consumer, may rise by as much as a quarter by 2015 compared with demand last year, according to a projection from the China Iron & Steel Association, which represents producers.

Consumption may increase between 12 percent and 25 percent from the level in 2010 to as much as 750 million metric tons in 2015, Luo Bingsheng, deputy party secretary of the association, which is known as CISA, said at a conference in Shanghai today.

In the past 30 years, China’s economy has expanded on average by 10 percent a year as it overhauled state-owned companies and allowed more foreign investment, boosting demand for commodities from iron ore to copper and coal. Iron ore is the principal raw material used to make steel.

China’s steel production in 2011 will exceed 680 million tons, Li Xinchuang, deputy secretary-general at CISA, said at the conference today. That estimate is based on a forecast that China’s economy will grow by more than 9 percent, he said.

CISA has suggested that the Shanghai Futures Exchange list futures for medium-to-thick steel strips so producers and users can hedge price risks, Luo said, without elaborating. About 43 percent of the steel that’s made in China is distributed by traders, which make prices more volatile, he said.

The pace of growth in China’s steel demand may ease to 2.6 percent from 4.6 percent annually through 2015 as the economy slows, the association said in April. China’s apparent steel consumption, which includes metal for stockpiles, averaged 17 percent a year from 2006 to 2010, according to Bloomberg calculations based on figures from the CISA’s website.

Raw-Material Costs

The aggregate profit at China’s 77 largest steelmakers fell 2.1 percent to 32.9 billion yuan ($5.1 billion) in the first four months of this year from a year ago, Luo said. The average margin was only 2.9 percent because of high raw-material costs, Luo said.

These mills generated combined profit of 90 billion yuan last year, Luo Tiejun, deputy head of the raw-material department of the Ministry of Industry and Information Technology, said at the conference. Baosteel Group Corp. (600019), China’s second-biggest mill by output, accounted for 26 percent of the profit, MIIT’s Luo said.

To contact Bloomberg News staff for this story: Helen Yuan in Shanghai at hyuan@bloomberg.net

To contact the editor responsible for this story: Paul Tighe at ptighe@bloomberg.net

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