Chinese crude steel output will peak at 886mn t in 2018 and then decline to 861mn t in 2019 and 842mn t in 2020, the Australian government's commodity forecaster the Office of the Chief Economist (OCE) said.
The OCE's predictions may undershoot actual output this year. China produced 617.4mn t of crude steel in January-August, up by 5.8pc from a year earlier, while output has been over 80mn t/month since May. The Australian government's forecast implies production will slow to around 67mn-68mn t/month in September-December.
The OCE expects a deeper cut in steel output as a result of autumn-winter output restrictions this year than in 2017, basing its prediction on an earlier proposal by China's environment ministry to reduce blast furnace output by 30-50pc in October-March. But Beijing has recently rejected that proposal and allowed these cities to set their own output limits, which may lead to a smaller cut in output compared with last year.
China steel consumption is expected to increase by 2.8pc to 810mn t this year on the back of strong real estate activity in smaller Chinese cities and Beijing's fiscal stimulus. But consumption is projected to decline in 2019 and 2020 to 794mn t and 776mn t respectively.
Morgan Stanley is forecasting China's demand for iron ore to peak this year and then slide from 2019 onwards because of a fall in crude steel output and increased use of scrap in steelmaking. China's total iron ore demand will hit 1.2bn t in 2018 and then gradually decline to 1.1bn t by 2023, it said.
Morgan Stanley expects China's domestic iron ore output to maintain a 16pc market share, despite the decline in overall iron ore demand. This will reduce China's imports of the raw material and pressure import prices in the medium term.