THE country’s steel consumption dropped this year for the first time since at least 2000 due to slower economic growth, leading to a surplus of iron ore in the country and a more than 40 percent plunge in prices of the steelmaking raw material.

    But top global miners like Vale and Rio Tinto, which have invested billions of dollars to ramp up output to sell more iron ore to China, are still convinced that Chinese demand has yet to peak with an urbanization drive here expected to last at least another decade.

    Apparent crude steel consumption in China, the world’s top consumer and producer of the alloy, fell 1.9 percent on year to 61.9 million tons in August, Wang Xiaoqi, vice chairman of the China Iron and Steel Association, told an industry conference.

    “There are many reasons for this — the economy slowing and the economy undergoing restructuring. Steel consuming sectors have cut their demand,” Wang said Thursday.

    With China now focusing growth on consumption and away from investment that has fuelled years of massive expansion in China’s steel sector, Wang said: “From now, domestic steel output and consumption won’t rise along with economic growth.”

    China’s steel consumption dropped 0.3 percent to 500 million tons in the first eight months of the year, he said.

    The decline in China’s steel consumption this year marks the first time demand has shrunk since 2000, said CLSA commodity strategist Ian Roper, who has tracked the data since that year.

    Iron ore fell below US$80 a ton last week for the first time since September 2009 and is on track for its biggest-ever annual drop amid a deep supply glut stoked by top, low-cost producers including Rio and Vale.

    China’s crude steel output is likely to hit 826 million tons for the year, said Wang, up 6 percent from the official 2013 output figure released by the government but only slightly above the 822 million tons cited in August by leading steelmaker Baoshan Iron and Steel.

    Weak demand has been a big strain on China’s steel sector this year with the Chinese Government, in a bid to cut down overcapacity, not too keen on rescuing companies as it has done before for fear of bloating the government’s bad debts.

    Sinosteel Corp., China’s biggest State-owned steel trader earlier told financial magazine Caixin that it was facing financial problems due to unpaid bills from customers, but denied rumors that it is struggling because of overdue loans amounting to 10 billion yuan (US$1.63 billion).

    Amid slower steel consumption, iron ore supply exceeded demand in China by 81 million tons over January to August, CISA’s Wang said.

    (SD-Agencies)