Although China remains the world’s top steel producer, the ‘good old days’ for steelmakers are long gone. In the first 11 months of 2011, China produced 631Mt of crude steel, up 9.8% from a year earlier, according to the National Statistics Bureau.

The figure lifted the year’s production to a new high, but expansion came at a much slower pace, compared to the 22.6% annual growth rate experienced between 2001 to 2005.

Meanwhile, the steel industry’s total profit margin stood at A mere 2.99% in the first nine months of 2011, representing a significant slowdown from the 8% margin recorded in the 2001-2005 period, CISA said in a report.

Steel prices were dragged down by declining fixed-asset investment and slowing manufacturing growth in the country. Steel consumption in almost every downstream sector underwent a downward trend, affected by weakening demand and cold weather.

Shrinking overseas consumption brought about by the European debt crisis and prevailing trade protection policies, and compounded by appreciation of the RMB, made it more difficult for steelmakers to export but, according to customs data, China’s steel exports stood at 45.16Mt between January and November, up 13.8% from a year earlier, while steel imports fell 4.2% year-onyear to 14.39Mt.

Presently, China’s domestic iron ore is slightly cheaper than imports, putting Chinese steelmakers in a position to limit their purchases of raw materials from overseas.

Steel prices have plummeted since September, and the industry is expected to see even lower product prices in the first half of 2012 before a rally in the second half 2012. In addition, with market oversupply hitting 22%, the industry will still experience meager profits in 2012.

Source: China Metals e-mail