Mysteel: 2021 Steel Market Outlook

　　The COVID-19 pandemic in 2020 had a profound impact on the global economic landscape, marking a transformation of unprecedented magnitude in a century. Following the large-scale outbreak of COVID-19, China swiftly implemented decisive measures, including city lockdowns, to contain the virus. In response to the economic disruptions caused by the pandemic, the Chinese government introduced a series of proactive fiscal and monetary policies. Throughout 2020, the steel market exhibited a distinct pattern characterized by high supply, robust demand, and elevated inventory levels. Price trends were predominantly upward, driven primarily by dual factors: surging demand and rising production costs.

　　Macro: The economy is expected to recover significantly in 2021, with inflation steadily rising overall. Monetary policy will gradually shift from an accommodative stance toward a more prudent approach.

　　The economy is expected to show a significant recovery throughout the year, with an overall trend likely to be strong in the first half and weaker in the second half. Inflation is anticipated to remain stable while gradually rising, with the PPI outperforming the CPI. Monetary policy will transition from an overall easing stance toward a more prudent approach, potentially becoming tighter domestically compared to Europe and the U.S. Meanwhile, Sino-U.S. economic and trade relations are expected to see marginal improvements. With vaccines being rolled out, the impact of the pandemic is gradually diminishing.

　　Supply: Crude steel production is expected to exceed 1.1 billion tons in 2021.

　　Due to the delayed capacity replacement and the concentrated release of newly built production capacities, crude steel output is expected to exceed 1.1 billion tons in 2021, representing an increase of 50 million tons compared to the 2020 output of 1.05 billion tons—a year-on-year growth rate of 5%.

　　Demand: The real estate sector, benefiting from resilient demand, is expected to perform better in the first half of the year compared to the second half. Infrastructure continues to gain momentum, while manufacturing keeps recovering, providing positive support for the panel industry.

　　2021 marks the beginning year of the 14th Five-Year Plan; stay tuned for next year's Two Sessions. Following the introduction of the "Three Red Lines," real estate enterprises have accelerated their activities in terms of project commencement, construction, and sales. Supported by resilient demand, performance in the first half of the year is expected to remain relatively strong compared to the second half. Meanwhile, property developers' willingness to acquire land has declined, potentially leading to a moderation in newly started construction areas in the later period. Infrastructure development continues to grow steadily, with an anticipated year-on-year growth rate exceeding 3%. Key projects such as the Xiongan New Area and high-speed railway networks are progressing smoothly—attention should be paid to the timely allocation of funding. Meanwhile, the manufacturing sector will continue its recovery momentum. Driven by the dual circulation strategy and the gradual rebound in overseas demand, industries such as machinery, automobiles, and home appliances are poised to maintain robust growth trends. Overall, the manufacturing sector is projected to expand by 3% in 2021, with manufacturing output rising by 5% and construction output growing by 2%.

　　Costs: Iron ore and coke supplies are in tight balance, resulting in highly rigid costs.

　　Looking ahead

　　Crude steel production and steel exports increased year-on-year, while domestic demand remained relatively robust amid the dual-circulation framework. Manufacturing is expected to outperform the real estate sector, with plate products showing stronger performance than long products. In the first half of the year, cost support continued to underpin market conditions; however, attention should be focused on shifts in supply-and-demand dynamics in the second half. On the supply side, output is anticipated to rise, with crude steel production projected to surpass 1.1 billion tons in 2021. As overseas demand recovers, steel exports are expected to grow significantly year-on-year. Domestically, driven by the dual-circulation strategy, China's internal demand is forecasted to remain strong. Meanwhile, manufacturing activities are likely to outpace the real estate market, particularly benefiting plate products. Looking ahead, cost pressures persisted in the first half of the year, but the focus will shift to monitoring supply-and-demand trends in the latter half. Overall, steel mills' profit margins are expected to expand by approximately 10% for the full year 2021.