China Steel Industry faces long winter

26 October 2015

Breakbulk handlers whose clients include Chinese iron and steel manufacturers, suppliers and buyers should prepare themselves for what could be a long winter for the nation’s major mills.

So far this year, though, the industry’s dreary business conditions have contributed to a surge in exports by Chinese mills that are busy shipping products overseas that they can’t sell at home.

An Oct. 20 report by the China Iron and Steel Association, or CISA, said weak domestic and international demand forced prices down for almost all major steel products in September.

Price-cutting resumed in August and intensified in September after a reversal of a year-long downward trend that saw prices rise briefly in July. Overall, Chinese steel prices have declined nearly 30 percent since September 2014, the report said.

Nearly half of the 34 steel companies listed on China’s stock markets are expected to report third-quarter losses, the state-run Securities Times newspaper reported Oct. 21. Angang Steel, one of the country’s largest, posted a third-quarter loss of 888 million yuan.

An economic slowdown in China, the world’s largest steel-making nation, has cut demand for types of steel used for new buildings and other construction projects. The international market for China’s steel exports is also experiencing “relatively slow growth,” CISA said.

Nevertheless, China Customs reported that for the first nine months of the year, exports of Chinese steel rose 27 percent compared to the same period 2014. Overseas shipments climbed even while prices declined 4 percent during the period, according to China Customs.

China’s recent devaluation of the yuan has had a “serious” impact on steel companies that buy raw materials such as iron ore from overseas mines, the Securities Times said. At the same time, the devaluation has improved the competitiveness of steel exports.

The National Bureau of Statistics said total crude steel output from the nation’s mills fell 2.1 percent to 609 million tons between January and September compared to the same period 2014.