Iron ore miner Rio Tinto says China's steel production will grow only modestly until 2030 but demand will increase rapidly in other emerging markets in Southeast Asia and India.
The world's largest producer of the steelmaking ingredient forecast China's annual steel production will reach 1 billion tons by 2030, from just over 800 million tonnes at present even as the economy slows. That growth will be driven by exports of higher value added finished goods as the world's largest producer moves up the manufacturing value chain, it said.
"We expect China will move up to the higher value added export market, based on what other countries have done on multiple continents, from Germany, the US, Japan and South Korea," Andrew Harding, Rio's head of iron ore, said in an interview.
Rio's analysis, however, is at odds with its biggest rival BHP Billiton, which last month lowered its forecast for peak steel demand in the country to a range of 935 million to 985 million tons a year in the mid-2020s from 1 billlion previously.
It is also contrary to that of the China Iron and Steel Association, which said in July that steel production probably peaked last year. It fell by 1.3 per cent in the first half of this year, the first contraction in 20 years, said China's official industry body.
Emerging markets other than China will be increasingly significant for iron ore, however, with their demand expected to rise by 65 per cent over the next 15 years, Rio said. Globally, it expects a 2.5 per cent average annual growth in steel demand in the next 15 years.
Iron ore prices fell to $44 a ton in July, the lowest level since the financial crisis, but have since risen to $55.80. Rio did not disclose its views on iron ore prices for the next 15 years.
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Rio said its forecast was based on a "granular" bottom-up analysis of demand in China, down to the number of bridges and apartment buildings that are likely to be built and expected growth in car ownership. By 2030, nearly 25 per cent of the current urban residential building stock will be demolished and rebuilt in China, the company said.
It also takes into consideration the substitution of steel for other metals such as aluminium, and the use of scrap steel from older buildings, Mr Harding said.
Growth in Southeast Asian countries and India over the next 15 years will provide markets for China's exports, he added.
Between the early 1950s and 1973, Japanese steel production grew at more than 15 per cent a year, before peaking at 119 million tons in 1973, according to David Humphreys, the author of The Remaking of the Mining Industry. US steel output peaked at 137 million tons in 1974.
China produced a record 822.7 million tons last year, about half of the world's output. A glut of steel production in China and a slowing economy have led to much of the metal making being exported, depressing global markets and stoking trade tensions.
However, Rio said it expects China's steel exports to be maintained at current levels.
Amid falling prices, Rio is targeting further cost-cutting and improved productivity. It said its cash costs for iron ore were $16.20 a ton in the first half of 2015, compared with $20.40 a ton for the same period last year.
The company is sticking with its plans to produce 335 million tons of iron ore next year and 350 million tons in 2017.