Chinese Production Data: Fixing a Fundamental Flaw – New solutions for accurately estimating Chinese production
China’s dominating influence on the global steel market—steelmaking raw materials demand, commodity pricing and trade—is undeniable, though there is an irony: the size of the domestic market is not known with any certainty. Reported crude steel production, for instance, is taken to be the benchmark indicator of output, and many analysts rely on this to evaluate domestic Chinese steel demand. However, there is consensus that this reference is wrong in that it understates true output levels.
Reported data through the Chinese steel supply chain is riddled with inconsistencies. Finished steel production is overstated due to suspected double counting, while we believe crude steel production is understated. The latter implies iron ore demand and domestic production that is too low and non-steelmaking coke consumption that is too high, both when judged against other credible research and data.
The above paper sets out CRU’s comprehensive solution to this problem:
- Removal of double-counting from reported finished steel production;
- Evaluation of crude steel and hot-metal production from corrected finished steel production volumes;
- Re-evaluation of steelmaking raw materials demand and domestic production from the above.
These changes imply substantial deviations from reported volumes of output for various commodities through the entire steel supply chain. However, they present a workable set of assumptions that eliminate many of the contradictions that hitherto have not been fundamentally addressed. To our knowledge, only CRU has developed such a fix and we have put forward a complete, coherent and credible set of supply/demand data for the entire Chinese steel supply chain. We believe that this re-presented data set more faithfully represents physical reality.