Bloomberg Intelligence
Chinese iron ore demand will likely stay strong in 2021 as steel output remains high, supported by demand from downstream sectors such as infrastructure construction, machinery and autos. China produced 1.05 billion tons of crude steel in 2020, up 5% from 2019, as steel mills have ramped up output since 2Q on government investments.
China crude-steel output may stay high in 2021
China's crude-steel output may stay high this year, supported by demand from downstream sectors including infrastructure construction, machinery and autos. The country could produce 1.07 billion tons crude steel in 2021, up 1% from 2020, according to the China Metallurgical Industry Planning and Research Institute, after a 5% year-over-year increase in 2020. The output growth last year was mainly driven by construction demand, which was estimated by the institute to have risen 13% year-over-year. Machinery demand increased 2% in 2020, while demand from autos dropped 1%. China's rising crude steel output could support iron ore prices, boosting revenue and profits of global iron ore miners including Vale, BHP, Rio Tinto, Fortescue, Anglo American, and Mount Gibson.
China's imports of iron ore may stay high in 2021 on stirring demand from steel mills, as they maintain high operating rates to deliver products to downstream consumers. The country imported 1.17 billion tons of iron ore in 2020, up 9.5% vs. the prior year and setting a record as steel mills ramped up production from 2Q on government investments in infrastructure construction after Covid-19 was sufficiently contained. Australia is still the largest supplier of iron ore to China, accounting for more than 60%. China is working to diversify its sources of iron ore to reduce reliance on Australia, by increasing the volume from India and explore mines in Africa.
