Production control is the key to resolving China’s steel sector glut according to Zhu Jimin, vice president of the China Iron and Steel Association (CISA).
According to Zhu, domestic steel demand has peaked and the steel industry has entered a new round of adjustment.
Apparent consumption of crude steel in 2013 increased 7.1% year-on-year compared with 2014 when it was down 3.29%. During the first eight months of 2015 it was down 5.49%.
Sharp increases in steel demand are a thing of the past and will fluctuate going forward, claims Zhu. He believes that the steel industry’s problems will not be solved by significant steel consumption.
He urged steelmakers to build up their brands and improve their performance during H2 2016 at the earliest, adding that the population increase should increase demand for basic necessities.
Chinese steel producers experienced huge losses during the first three quarters of the year with aggregate losses from their main business amounting to 55.27 billion yuan (US$8.7 billion).
CISA data shows that 22 out of 34 listed Chinese steelmakers were in the red during the first three quarters of 2015 and 49 mills incurred losses over the period.
“The economic slowdown has led to marked consumption declines in rolled steel,” according to Zhu. He attributed the lacklustre performance of the industry to falling steel demand and argued that the industry should slash production given the gloomy economic climate.
CISA data shows that the steel composite price index was 99.14 at the beginning of 2014 and fell 16.2% to 83.09 by the year-end. By September the index fell to 60.71.
• Chongqing Iron and Steel reported losses of 3.2 billion yuan over the period while MaSteel incurred a loss of 2.6 billion yuan.
• Baosteel bucked the trend, making a 2.25 billion yuan profit, although it lost 920 million yuan in Q3.
• Ansteel incurred losses of 888 million yuan (US$ ) between January and September 2015 following profits of 923 million yuan over the same period of 2014.
• Fushun Special Steel reported net profits of 184 million yuan for the first three quarters of 2015, up 714% when compared with the same period last year. The company attributes its success to innovations in product structure, technologies and capital operation.
• Baihetan Water power plant in southwest China – the country’s second largest water power station after the Three Gorges Dam facility – has entered into a steel supply contract with Hebei Steel.
• Valin Steel has increased its investment in e-commerce by 38 million yuan. It raised the addition funds by itself.