From 2021 to 2022, although the main downstream of electrical steel still maintained an upward momentum, the increase rate was significantly narrowed, among which the increase in automobile production was stable, and the refrigerator production showed a significant decline. SMM expects that the downstream demand for non-oriented electrical steel is expected to expand slightly and modestly in 2023, but the pace of demand expansion will be significantly slower than the expansion of production capacity, but considering that the supply elasticity of new semi-process capacity is relatively large, and the profitability of electrical steel production enterprises is weak, we expect that the impact of easy supply on the price of non-oriented electrical steel is more limited.

In terms of domestic demand, China's economic development is still facing the triple pressure of shrinking demand, supply shock and weakening expectations. Therefore, in 2023, China's economic work will still be based on "stability", focusing on "stable growth, stable employment and stable prices". In the context of this "stability", expanding domestic demand is still a major tone and is listed in the first place of economic work tasks. Two macro policy documents, the Outline of the Strategic Plan for Expanding Domestic Demand (2022-2035) and the Implementation Plan for the Strategy for Expanding Domestic Demand in the 14th Five-Year Plan, have made corresponding arrangements for the specific plans for expanding domestic demand.

In terms of foreign trade, the risk of global economic recession will rise in 2023, and the growth of external demand will continue to slow down. Global economic growth is expected to slow to 2.9 percent in 2023 from an estimated 3.4 percent last year, according to the International Monetary Fund's (IMF) new World Economic Outlook. According to the World Trade Organization (WTO) report, currently, export orders are falling, air transport conditions have not returned to normal levels, container throughput is not ideal, slightly below trend, and the volume of global goods trade in 2023 is likely to grow by only 1%, down from the previous forecast of 3.4%.

SMM predicts that in 2023, China's new energy vehicle production will reach 9.05 million units, and the increased demand for new energy grade non-oriented electrical steel will be about 228,000 tons. Considering that the new energy grade non-oriented electrical steel production capacity added in 2022 is put into operation in the second half or the end of the year, the new energy non-oriented electrical steel production capacity increase in 2023 is about 840,000 tons. Therefore, in terms of new capacity and expected demand, the incremental supply side is significantly greater than the incremental demand.