Overcapacity, slowdown bring steel industry losses in China

BEIJING - More than 45% China’s of domestic steel companies have reported losses as growth hits an 18-month low of 7.4%. Total losses stood at RMB2.33 billion against almost RMB8 billion in profits in the same period last year, according to the China Iron and Steel Association (CISA). At the end of March, inventories amounted to 19.4 million tons, up 43.5% on the start of the year.

The losses are primarily due to overcapacity, excess supply, and sagging prices, according to a work report, which says 27 million tons of production capacity should be cut in the sector this year. The Government placed strict controls on new steel production last year, but new projects are still being carried out.

Domestic steel production is projected to reach 810 million tons this year, representing growth of roughly 3%, compared with demand growth of 3.2% at 715 million tons. The Ggovernment has already begun a campaign to eliminate excess capacity, and is promoting mergers and acquisitions among steel firms to increase efficiency.