Rio Tinto Group, the world’s second-largest iron ore producer, anticipates that Chinese steel consumption is nearing its zenith, with demand in the upcoming year expected to mirror that of 2023.
China’s hunger for iron ore, the primary ingredient in steel production, has surged in recent months, offsetting sluggish demand from the crucial real estate sector due to some brighter spots in the economy.
However, Rio Tinto Group CEO Jakob Stausholm believes that the two decades of rapid steel consumption growth are likely drawing to a close.
“We foresee that China’s peak steel demand is on the verge of being attained,” he stated during an interview at Bloomberg’s New York headquarters. “This isn’t due to a lack of growth in the Chinese economy, but rather because it has reached a level of maturity.”
The idea that China’s steel market will likely contract in the coming decade, after many years of breakneck expansion, is a widely held belief in the industry. Rio’s competitor, BHP Group, believes that annual production has reached a plateau slightly above one billion tons per year, which is expected to persist until 2024. Analysts at Capital Economics Ltd. suggest that demand and supply probably reached their peak in 2020.
Despite concerning news from the real estate sector, which typically accounted for approximately 40% of demand in previous years, iron ore prices reached their highest levels since April earlier this month and have largely remained above the critical $100-per-ton mark this year.