Auto market to push steel demand up 12% in China image

China’s booming auto market demand may push steel demand in the country by 12% next year, lifting the prices of iron ore, Bloomberg reported today, citing an industry expert.

Domestic crude steel consumption may increase to 606 million metric tons in 2010, following a 14% gain this year to 541.4 million tons, said Luo Wei, a Shanghai-based analyst with China International Capital Corp. Benchmark contract prices for iron ore, used in steelmaking, may rise 15% to 20%, he said.

Steel prices in the country have risen 10% from this year’s Oct. 15 low as manufacturers and traders deplete stockpiles and mills raise prices because of rising costs. Automobile and property sectors would be the big engines to drive up steel demand in 2010, the expert said in a report.

China’s auto demand will have “high growth rates” next year, and there’s “good prospects” for home appliance demand as the Chinese government boosted rural sales with its stimulus spending, Baosteel, the largest Chinese steelmaker, said earlier this month.

The steel price revival will hamper China’s ability to bargain contract iron ore prices paid to Rio Tinto Group, BHP Billiton Ltd. and Vale SA. Prices may jump 14% in 2010 to the second-highest on record, according to Bloomberg News.

Overall vehicle sales in China may reach 13 million units this year, up from last year’s 9.38 million, said an auto industry official last week. If the government incentives extend, China’s auto sales can grow by 10% or more in 2010.

Source: Gasgoo

  • Phil Eyler

    What a fairy tale. Steel consumption in the Chinese auto industry will end the 2009 year at about 15 million tons for 13 million autos. Sales may well be projected to increase by 10% for 2010. That will do virtually nothing to increase overall steel consumption. If China produces 600 million tons of steel next year compared with the 565 million tons to be produced this year, an extra 2 tons for the steel industry does little to meet increased steel supply. China already has over 80 million tons of steel inventory. Sit down and look at the obvious. How much steel is in a car? How much steel is in 13 million cars? With less than 3% of China's steel production going to the auto industry, here is just no way on God's Green Earth that the auto industry is going to rescue the steel industry from its overproduction crisis.