February 2022
China’s steel exports for 2021 were 66.9Mt, up 24.6% year on year. The global steel imbalance favoured China during the steel shortage at the beginning of 2021. China pounced on the opportunity it offered during the first six months of 2021, with average monthly steel exports of 6.23Mt. This represents a 30.2% jump from the same period of last year.

A significant event impacting China’s steel exports was the elimination of the value added tax (VAT) rebate. On 1st May 2021 and again in August 2021, the Chinese government removed its steel export value added tax (VAT) rebates for 146 steel products, including cold-rolled coil (CRC), hot-dipped galvanised (HDG) steel coil and sheets, electro-galvanised steel coils and sheet, silicon steel and rail steel.

The VAT rebate was approximately 13%. The purpose at the time was to reduce the country’s crude steel output to meet its decarbonisation goals, increase domestic supplies, discourage value-added export and control the iron ore price. Another reason for the removal of the VAT rebate was to promote the transformation, upgrading and high-quality development of the steel industry.

Chinese steel producers generally increase their stock/inventory in winter to lock in relatively low prices and then sell the stock after the new year holiday as seasonal consumption resumes. This season, however, steel producers were not stockpiling. However, steel demand will pick up during the peak construction season, beginning after the Lunar New Year holiday, and continue from March to May (spring), with the rainy season commencing in June.



Demand & Supply

The Evergrande default crisis has also cooled steel demand and impacted the real estate sector in China. At one stage, Evergrande’s liabilities were equal to almost 2% of China’s GDP. In early January 2022, the company was ordered by government authorities in Danzhou, Hainan, to demolish 39 buildings at its Ocean Flower Island development due to the legality of its project’s planning permits. According to the National Bureau of Statistics of China, floor space of houses newly started (residential buildings) and land acquisition area declined 10.9% and 15.5%, respectively, year on year.

AME expects China’s 2022 and 2023 finished steel demand to be 1,010Mt, up 1.5%; and 1,020Mt, up 1%, respectively year on year. In the medium and long term, the average growth rate is expected to be 0.7% from 2024 to 2040. China’s urbanisation has been one of the main drivers of its property development since the early 1980s.

Its urbanisation rate for 2021 was approximately 65%. According to the Ministry of Housing and Urban-Rural Development, urbanisation generally slows and becomes less steel-intensive when the rate is above 60%. AME expects subdued demand from China’s property sector for the next 6-12 months, although infrastructure investment will be firm.

AME expects China’s 2022 and 2023 crude steel supply to be 1,055Mt, up 0.9%, and 1,065Mt, also up 0.9%, respectively year on year. In the medium and long term, the average growth rate is expected to be 0.3% from 2024 to 2040. China’s capacity replacement ratio swap became stricter in early 2021 from 1.25:1 to 1.5:1. This means that, for every new installation of 1Mt of crude steel capacity, the producer will need to eliminate 1.5Mt of existing capacity.

Kunming Iron and Steel, located in Anning County, Kunming City, is planning to commission its new 1.7Mt blast furnace in late February 2022. Further projects include the construction of a pellet plant, a sintering machine and two BFs with total crude steel capacity of 2.8Mt, with operations expected to start at the end of 2023. The company also decommission its outdated equipment, including a BF and BOFs which have already been dismantled, while another BF and BOF are awaiting government approval for demolition.



China’s steel imports for 2021 were 14.3Mt, down 29.5% year on year. However, the decline was from a relatively high base as government stimulus supported the Chinese economy. In 2020, as steel demand declined in the rest of the world, steel producers were able to survive on shipments to China.

The rising steel imports seen during September to November 2021 resulted from power rationing which ultimately impacted long steel markets. The power crisis in China was mostly related to coal-generated electricity supply shortages and tightening emissions targets. Consequently, average monthly rebar prices also increased from September to November 2021.




Baowu Steel has recently announced it plans to reach peak carbon emissions in 2023 and carbon neutrality by 2050. The company is adopting several strategies to achieve decarbonisation. For instance, Baowu Steel has been developing hydrogen-rich blast furnace technology and pure hydrogen furnace technology. This has the potential to boost scrap consumption to approximately 50% in its converters.

The International Energy Agency (IEA) has suggested scrap share of metallic input in China will need to increase to approximately 55% (from ~23% in 2021) by 2050 under its ‘Sustainable Development Scenario’. Baowu Steel has backtracked on its plans to build #4 and #5 blast furnaces in Zhanjiang, Guangdong province. The company will now build its first hydrogen furnace, which includes EAF steelmaking and is expecting to use natural gas, wind and solar power to generate green hydrogen.



One of China’s priorities for its steelmaking industry, according to the 14th five-year plan, is to increase the usage of scrap and EAF steel production. Specifically, China is looking at increasing its scrap charge ratio to 30%, which means each ton of steel produced will use 300kg of ferrous scrap.

China is planning to increase its ratio of EAF steelmaking production to 15-20% of total crude steel production by 2025. AME estimates China’s steelmaking technology mix for EAF facilities at approximately 9.3% in 2021. Currently, this is expected to increase to 13.8% in 2025 and to 17% by 2030.

China’s imports of ferrous scrap for 2021 came to 555.8kt, up 1,948% from the prior year. China resumed its imports of renewable steel materials classified as ferrous scrap in January 2021. The imports increased for the first time in four years, as China placed a ban on ferrous scrap in 2019, which mainly consisted of miscellaneous scraps. The majority of China’s imported scrap is from Japan and South Korea, which account for 71% and 17%, respectively, of total scrap imports.