China steel market walks high wire between cutting output, boosting growth

LAUNCESTON, Australia, April 20 (Reuters) - China's iron ore and steel markets are having to juggle several different and contradictory factors in trying to work out whether the current elevated prices are justified.

The two biggest issues are the aim of the government to once again limit steel output this year to a level below that of 2021, while at the same time accelerating economic growth in the second half of the year to meet a 5.5% annual target.

At first glance, the call by China's state planner for a reduction in crude steel output in 2022 seems bearish for iron ore demand, but perhaps bullish for steel prices, especially if there is a supply shortage in the second half of the year.

The National Development and Reform Commission will ensure energy consumption and environmental controls meet requirements, spokesman Meng Wei told a briefing on Tuesday.

"The target is to make sure that national crude steel output will fall in 2022 from a year earlier," said Meng, adding that key areas for cuts include Beijing-Tianjin-Hebei and the Yangtze river delta.