China'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 there 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 tonnes 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 on Thursday.
With China now focusing growth on consumption and away from investment that has fueled 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.
China's economy got off to a weak start this year as first-quarter growth cooled to a six-quarter low of 7.4 percent. Beijing responded with a flurry of stimulus measures that pushed the pace up slightly to 7.5 percent in the second quarter, but soft July and August data suggest the boost is rapidly waning.
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.