China’s steel industry suffered severely in 2009. Due to the global financial crisis, a majority of developed countries entered economic recession. The resulting decline in demand, especially for steel, produced deleterious effects which were not lost on China’s steel industry. However, a pickup in domestic demand has greatly helped local producers recover from the crisis and has promoted their further development.

China’s steel industry displayed five major trends in 2009:

I．Both the output and the consumption of crude steel are expected to exceed 565 million tonnes to reach a new high.

1. The actual deduction in crude steel inventory will be more than 500 million tonnes. China's stimulus package has caused an acceleration in industrialisation and urbanisation, resulting in higher steel consumption due to a surge in construction activity.
2. In November, the output of crude steel surpassed 1.57 million tons, an increase of 37.4% over the same period in 2008. In September, the average daily output was at its highest in 2009 at 1.69 million tonnes.

II．China’s steel exports have experienced setbacks, as the vibrancy of the domestic market has outpaced that abroad. Although a major net exporter of steel in previous years, China now imports quantities which rival the out-going totals.

1. From January to November the net export of steel equaled 980,000 tonnes, a reduction of 98% y-o-y.
2. It is predicted that annual imports of crude steel and billet will total 23.8 million tonnes, while exports will equate to around 25 million tonnes. This narrowed gap between imports and exports signifies that China is no longer predominantly export oriented in rudimentary steel.
3. Excluding billet, China increasingly imported more steel than it exported from April to June, a trend which restarted again in November. It is expected that imports will continue to dominate through 2010.

III. The structure of demand has changed significantly, with a shift toward more toward long products.

1. From January to November 2009, the output of rails, long products and narrow tape all increased by 24% y-o-y.
2. The output of plate (narrow tape excluded) increased very little – only 8.4%.

IV. The overall steel market was relatively stable this year. Price movements fluctuated within reasonable levels.

1. As a result of the global financial crisis, the international demand for steel decreased substantially causing a severe drop in the commodity’s price. The price of steel on the Chinese market was also affected.
2. The decline in the price of steel accelerated after October 2008, dropping to 1994 price levels by the beginning of November 2008.
3. From November 2008 to November 2009, the steel price moved within a narrow range, and has remained at a similar but slightly higher level in comparison to November last year.

V. The profitability of the steel industry dropped sharply this year. Small to medium sized steel mills who specialise in long products profited more than larger steel mills who specialise in plates.

1. From January to October 2009, the total industrial output value for 70 medium to large sized steel mills decreased by 20% y-o-y – sales decreased by 20% y-o-y while profits decreased by 70% y-o-y.
2. Medium to large sized steel mills ran deficits for seven months, from October 2008 to April 2009. The deficits switched to profits only in May of this year, and until recently, these profits have remained small.