China’s relentless influence

The World Steel Association (Worldsteel) recently released its Short Range Outlook (SRO) for 2021 and 2022. Worldsteel forecasts that steel demand will grow by 5.8% in 2021 to reach 1 874.0 million metric tons (Mt), after declining by 0.2% in 2020. In 2022 steel demand will see further growth of 2.7% to reach 1 924.6 Mt.

The current forecast assumes that the ongoing second or third waves of COVID-19 infections will stabilise in the second quarter and that steady progress on vaccinations will be made, allowing a gradual return to normality in major steel-using countries. Demand from automotive and construction sectors offer the best prospects for growth, the report says.

It is not surprising that China heads up the list with a growth of 9.1% forecast. This relates to a consumption of 1 024.9 million Mt in 2021. That’s a staggering figure if you consider the association forecasts that Africa will grow by 8.3% in 2021 and by 5.9% in 2022 after contracting by 9.4% in 2020. The figures in tons are 35.6 Mt for 2020, 38.6 million Mt for 2021 and 40.9 million Mt for 2022. That equates to Africa only consuming 3.77% of the amount of what China will consume in 2021.

Approximate figures for China’s population are 1.398 billion and for Africa it is 1.216 billion. There is not much difference in population (13%) but a huge difference in the steel consumption. You should not assume without facts but there could be similar differences for many other products in all spheres of industry and life.

According to the report China’s economy quickly rebounded from the lockdown in late February 2020, and almost all economic activity except retailing resumed full productivity by May. Since then, despite sporadic small localised waves of COVID-19, economic activity has not been affected by the pandemic, unlike the rest of the world.

The Chinese economy benefited from the government’s implementation of various measures to stimulate the economy. From several new infrastructure projects and accelerating existing projects, to relaxing control over the real estate sector and tax reduction to boost household consumption. On top of this the economy benefitted from strong exports as the rest of the world was affected by the pandemic.

But what are these exports. It is widely reported that China is not bountiful in its mineral resources – and many other commodities – hence its big interest in Africa. It is said that more than three‐quarters of exports are attractive to consumers: Computers and computer accessories; cell phones and other telecommunications equipment; furniture, appliances and other household goods; clothing and shoes; toys, sporting goods, and TVs, radios and other consumer electronics. The remaining 25 per cent of exports are industrial supplies and industrial machinery. And this must be the worry for manufacturers worldwide.

In a recent interview with Philipp Burgener, Managing Director of Bystronic Sales AG on the announcement of the opening of DNE Laser South Africa I asked him what the trend was in Europe with regard to Chinese equipment: “The ability to offer equipment that meets the budget requirements across all spheres of manufacturers is not just an emerging countries development. Budget conscious companies in Europe are also looking for the economical, entry level equipment that does not come with complex and expensive features. This is the fastest growing segment of the market and machine manufacturers are feeling the pressure to provide solutions, otherwise they must be prepared to lose out.”

This emphasises the point that it is not just consumer goods from China that are penetrating the rest of the world.