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China's Baowu expects steel sales growth to slow

10 Apr 2018 08:50 (+01:00 GMT)
China's Baowu expects steel sales growth to slow

Singapore, 10 April (Argus) — Chinese state-controlled steel producer Baowu expects its sales and output growth to slow this year as China's steel consumption either remains flat or falls slightly.

Baowu expects to sell 46.68mn t of steel products in 2018, up by just 1.1pc from 46.17mn t last year. Its sales rose by 21.5pc in 2017. The company, the world's second-largest steel producer behind Luxembourg-based ArcelorMittal, was formed through the merger of Baosteel and Wuhan Iron & Steel in 2016.

The firm's steel product output is expected to rise to 47.37mn t in 2018 from 45.38mn t last year. Output rose by 20.7pc in 2017, while inventories fell by around 29pc to 2.43mn t.

China's consumption and exports of goods and services are likely to grow at a steady pace in 2018, but fixed-asset investment growth could slow, Baowu said. It expects China's economic growth to hit 6.7pc this year, down from 6.9pc in 2017. These developments will keep China's steel demand either flat or push it down slightly while global steel consumption will post a slight increase in 2018.

Baowu has completed its main expansion project and started full operations at its Zhanjiang greenfield plant in south China. The company is planning capital expenditure of around $2bn this year, mainly to streamline operations across plants.

The intensifying of global trade frictions after the US' decision to levy a 25pc import duty on steel are key challenges to the firm's profitability and sales increases this year. Emissions standards in China have become "increasingly stringent", which will hit steel production. And domestic private-sector steelmakers in China have invested in high-end products, eating into Baowu's domination of the flat products market. Baowu likely has a share of over 50pc in China's automotive steel market.

The company said its main goal this year will be to consolidate its leading position in the domestic steel sheet market.

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