Chinese demand for steel surprised to the upside in 2020 overall, growing around 9% year-on-year, ArcelorMittal noted.
For the company, this trend is supported by a policy that calls for an increase in the intensity of construction steel.
While demand is likely to grow further in 2021, it is expected to eventually decline as infrastructure spending has come ahead and demand for real estate structurally weakens due to lower levels of rural-urban migration.
Additionally, also according to ArcelorMittal, if this does not coincide with renewed capacity closures, it is expected to have a negative impact on steel prices and spreads.
Historically, demand dynamics in China have substantially affected the global steel business, primarily due to significant changes in net steel exports.
Although the pandemic significantly affected China in February and March 2020, the increased use by the government of local and special sovereign bonds to finance further investment, mainly infrastructure projects, supported a strong recovery in steel consumption. .
Manufacturing production also recovered strongly and returned to the growth trend in the early second half of 2020.
Overcapacity and oversupply in the steel industry and in the iron ore mining industry have influenced the past and may continue into the future on the profitability of steel producers, including ArcelorMittal.
Unlike many commodities, steel is not completely expendable due to vast differences in its shape, chemical composition, quality, specifications, and application, all of which affect selling prices.
Consequently, there is still a limited exchange and a uniform price of steel, while there is an increase in the trade of steel raw materials, in particular iron ore.
Spot prices for commodities can vary, causing export sales prices to fluctuate based on the global balance of supply and demand at the time sales are made.