The slowdown of domestic economic growth, coupled with the long-standing severe over-supply in the steel sector, has resulted in falling steel prices and financial losses of China’s major steelmakers.

However, the turning point now seems to be close with signs of increased demand in the final quarter 2012 as well as support from the government.

Since the beginning of 2012, the steel sector has been struggling to pass on growing production costs while waning market demand worsened the situation. CISA members registered a total loss of RMB 5.538bn (US$869M) in the first three quarters 2012, compared with a total profit of RMB83.692bn ($13.1bn) in the same period last year.
The country made 602.25Mt of crude steel in the first 10 months 2012, up 2.1% on the same period 2011. In contrast, the output grew by 11.1% in the same period 2011/10.

China exported 45.82Mt of rolled steel products in the first 10 months 2012, 4.83Mt up on the same period last year. The country imported 13.69Mt of rolled steel products in the period, 1.63Mt less than it did in the same period last year. This strongly indicates damped domestic demands.

High inventory levels have eased since late August and early September. Stocks of major steel products (covering 26 major domestic markets, 5 main steer products, including medium plate, cold rolled sheet, hot rolled sheet, wire rod and rebar) stood at 12.0848Mt as of November 9, down 2.8% from the end-October. The November figure was the ninth consecutive month on month reduction in the country’s steel stocks. Compared with the beginning of this year, the inventory level was 815800t lower, and 1.3428Mt lower than a year earlier.

Source: China Metals e-mail