CLIK's review of China's steel market in 2018:

1. The market of substandard steel was nearly substituted by the regular crude steel which has reached a new high in production.

2. In the place of iron ore, scrap has flowed to the standard steel mills. In 2018, the production ratio of iron and steel in China was 83%. Due to the strict preventive measures against substandard steel, the annual scrap consumption in theory increased by 48 million MTs, equivalent to nearly 72 million MTs of iron ore fines, accounting for nearly 7% of the total iron ore imports in 2018. This indicates that scrap has much more to do with the substitution of iron ore in steel production and the growing coupling effects of steel and ore prices. Scrap has once again become important to stabilize iron ore prices since 2017.

3. Industry profits have increased significantly. In 2018, the cumulative revenue of China's ferrous metal smelting and rolling industry was 672.56 billion yuan (USD 100.32 bn), of which the main income was 640.65 billion yuan (USD 95.56 bn), a year-on-year increase of 15.0%. The industry profit was 401.93 billion yuan (USD 59.95 bn), with the profit rate of 6.0%. The profit of crude steel was about 433 yuan/mt (USD 64.58/mt).The year-on-year increase of 37.8% in steel profit ranked third in the nation's industries, second only to oil and natural gas extraction and non-metallic mineral products.

4. High grade iron ore is favored, due to the higher premium of high grade and low grade ores.

5. In 2018, China has taken a great leap in the environmental protection in the steel industry. Thanks to the rise in the industry's profits, debt burdens and financial leverage have been reduced for the steel enterprises, which is conducive to the improvement in technology, facilities for environmental protection, energy conservation, smart manufacturing and automation, ultimately reducing costs and increasing efficiency.