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By Yin Lei

The production and prices of steel in China have been enjoying a surge, but the boom on the demand side may not last forever, according to a report by the 21st Century Business Herald on Monday.

In July, 21 million tons of crude steel were produced in Hebei province, a steel production powerhouse in northern China adjacent to Beijing. Across the country, over 81 million tons of crude steel were produced for the month, which, if annualized to a yearly amount of 970 million tons, represents a threefold increase during the past decade.

Amid the robust production in the steel mills, prices at home have been climbing. Last Friday, billet price in China hit RMB 4,040, the highest since the end of 2011. Manufacturers were making huge profits that surged by 93.4 percent in the first half of 2018.

The higher steel prices may have been fueled by the removal of substandard steel last year and the upcoming production caps in winter, but the explanation may also lie in the rising demand in the manufacturing and infrastructure sectors.

The rapid growth in the field of equipment manufacturing had increased the demand for steel, said Liu Yongchang, deputy secretary-general of the China Chamber of Commerce for Metallurgical Enterprises, to the above news agency. For example, the manufacturing of excavators, which are needed in large number at home and in the Belt and Road countries, consume a lot of steel. As of the end of July, China produced over 158 thousand excavators, up by 45.7 percent year-on-year.

Looking ahead, steel prices may remain on an upward track but will unlikely see hikes, experts believe.

The upcoming production cap late in the year will suppress supply, while demand in the real estate and manufacturing sectors will be on a steady rise.

On the other hand, China’s investment growth was slowing down. From January to July, its investments were up by 5.5 percent year-on-year, the lowest level in 10 years. The increased investments in infrastructure, expected to come in the second half of this year, would be targeted mainly at the weak links of this sector instead of the sector as a whole.