1 November 2015

The Chinese metallurgical industry is going through hard times

The Chinese steel sector is in shock over the shock. Exchange analysts provided their own data. CISA - Metallurgical National Association - they are fully confirmed. When compiling the data, I-III quarters of 2015 were considered. Based on the results of more than 70 medium and large companies in the steel sector, they suffered losses. The total damage from its core business reached 8.7 billion USD. At the same time, for the first 6 months the financial damage amounted to 3.4 billion USD.

According to Zhu Jimin, vice president of CISA, in China, the reduction in consumption of steel products is gaining momentum. According to CISA in September, the fall was 8.65% compared to September 2014. Over the 9-month period, the consumption of rolled products in the country declined by more than 5.8%. At the same time, the volume of steel production fell only by 2.1%. For January-September they amounted to about 609 million tons. Zhu Jimin believes that it is possible to restore the balance of the national market. To do this, either increase demand, or narrow the excess supply. However, the first item in the visible future is hardly possible to realize.

Now the leaders-producers of the metallurgical sector of China keep the capacity utilization at a high level. So they compensate for the decline in the cost of production. For the 9-month period, the income of medium and large companies in comparison with 2014 fell by 19.3%. It amounted to 2.24 trillion. Yuan - or 352.5 billion USD. And yet, the decline in output has become an inevitable process. The main reason is financial. In 2015, the People's Bank of China repeatedly reduced the base rate. But manufacturers are faced with rising costs of credit resources. Refinancing loans often becomes problematic for companies.

Some companies began to close excess capacity. The company "Bayi Steel" suspended the activities of certain assets. Their annual aggregate capacity is 3 million tons. The company "Maanshan Iron & Steel" plans by the end of 2015 to stop certain production lines. The company "Hangzhou Iron & Steel" will stop the plant "Banshan". In a year it can produce about 3.3 tons of steel. Specialists of the company Custeel calculated that in October they stopped the work of 24 stoves. In the near future, this indicator can significantly increase. The reason is the constantly growing losses of producers.

Metallurgists of the PRC show enviable activity in world markets. And restrictions on the import of products do not stop them. Some experts are of the opinion that the volume of Chinese exports of steel in 2015 will exceed 110 million tons.

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