China has reported its full-year steel output touched a record high of 822.7 million tonnes. It accounts for about 50% of forecast steel global production. However, the steel output growth was slowest in more than two decades as the government itself has ordered the producers to lower production.
The steel production rose 7.6% to 68.09 million tonnes in December 2014, the highest since August 2014. The daily rates came at 2.196 million tonnes against the annual average of 2.254 million tonnes. As per CISA, the steel output is near to its peak as the producers work to reduce excess capacity.
The steel production numbers indicate that the government succeeded in its measures to tackle overcapacity and pollution. The producers are still facing the problem of overcapacity due to low demand and steep decline in commodities prices.
In the last eight years, steel production had doubled in China. However, the government had to reduce the production as the cooling economy in China curbed demand. Along with the overcapacity, it had to deal with the problem of pollution, especially in northern regions.
The analysts in the steel sector expect to see a marginal growth in steel output this year. Chinese government has approved several infrastructure construction projects which can result in higher steel demand.
China’s economy grew at 7.4% in 2014 compared to 7.7% in 2013 which is the weakest expansion in last 24 years. The slipping economic momentum has severe implications, squeezing Chilean copper mines and Australian government budgets that are much more dependent on China’s economy growth. The cooling economy has adversely affected the commodities prices.
The slowdown in China’s economy is partly a result of government’s measures to transform the economy. It wants to reduce the dependence on heavy industry. However, the transition has been adversely affected by other problems like uneven exports and slumping property market.