Chinese steel demand will peak in 2024 in a range of 700-800 kilograms per person, doubling the per capita level of use in 2008 of 375 kg, and then decline only slowly in following years, according to an analysis on China's metal intensity use presented Wednesday by Westpac Banking Corp. (WBC.AU) senior economist Huw McKay.

The usage estimate is based on a projection of Chinese gross domestic product per person growing to US$15,449 in 2024, almost tripling the actual level of US$5,449 in 2008, he said.

In turn, the projected 2024 peak for steel demand is based on Chinese GDP per capita between 1980 and 2008 growing at an average compound rate of 7% a year, but if the somewhat faster post-1990 rate of GDP per capita of 7.8% is used, then peak steel demand will be reached in 2021, he added.

"Basically per capita income has to triple from its 2008 level to hit that target at which we assess steel demand will peak," McKay told a seminar at Australian National University .

The timing and quantum of peak demand for raw materials in China are keenly sought by miners and mineral processors as they are an important driver of world economic growth and demand for resources, including steel, one of the key materials used in China 's massive urbanization.

Australia is a major global supplier of steel's two main ingredients, iron ore and coking coal, with the volume of trade helping to underpin the domestic economy.

The fortunes of investors in major exporters of these minerals such as BHP Billiton Ltd. (BHP), Rio Tinto Ltd. (RTP) and Fortescue Metals Group (FMG.AU) are closely tied to the outlook for steel demand.

McKay was delivering a paper prepared by himself, Yu Sheng of the Australian Bureau of Agricultural and Resource Economics and Ligang Shang of the China economy program at Australian National University .

The team developed a new analytical model that related economic development to metal usage.

The theoretical model shows that steel demand will remain at or near the high point for a considerable period either side of the actual peak, McKay said.

" China 's acceleration is still very much ahead of it but when that peak does arrive we aren't expecting an abrupt fall" in demand, which is good news for a resource-leveraged economy like Australia , he said. "There isn't going to be an abrupt deceleration."

One of the reasons for this is the distortions in the Chinese labor market, which has held back the urbanization rate relative to China 's current level of income.

China 's urbanization rate could be significantly higher if labor were free to move, he said.

Japan , for instance, hasn't dropped sharply from its peak level of steel demand and has remained near that level for a considerable period of time, as have Taiwan and South Korea , he noted.

McKay conceded there are many challenges ahead for China 's economy, with growth harder to come by in the coming decade than in the decade just past. While this could flatten the steel demand growth trajectory, it won't change the expectation of where the peak will be--rather it only means the peak will be reached at a later date and in a less abrupt manner.

The structural elements of Chinese economic growth pertaining to demand for resources are going to be strengthening considerably over the course of this next cycle, he said.

"While the cyclical momentum in the Chinese economy is quite weak right now, I think the structural underpinning for the economy very much remains in place. While the cycle will probably win the tussle over the next 12 months or so, this structural underpinning will certainly re-assert itself relatively soon."

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