中文
China's steel sector currently faces high output, high costs, and high inventory levels, alongside low demand, low prices, and low margins, said Jiang Wei, vice chairman of the China Iron and Steel Association (CISA), during a recent industry conference.
Jiang noted that the surplus steel production has led to increased prices of upstream raw materials while suppressing prices of finished steel products.
Official data showed China's crude steel output had maintained above one billion tonnes for four years in a row, reaching 1.053 billion, 1.033 billion, 1.013 billion and 1.019 billion tonnes during 2020-23 respectively. However, it declined 1.9% year on year to 256.55 million tonnes in the first quarter of 2024.
Meanwhile, domestic steel consumption has been decreasing for three consecutive years, a trend observed since 2000.
The significant expansion of steel production capacity and subsequent rapid output increase have caused steel inventory to reach a record high at steel firms.
Jiang pointed out a clear correlation between steel inventory and steel producers' profit margins: the higher the inventory, the lower the profit margins.
Analysis of historical data from July 2022 to 2024 reveals that a 1% increase in output leads to a 0.43% rise in steel inventory. Moreover, a 1% inventory increase results in a 0.47% drop in steel price, leading to a profit decline of approximately 0.54%, he said.
Therefore, the steel industry's key focus now is to promptly reduce inventory to safeguard profits, Jiang emphasized.
Furthermore, China is promoting extensive equipment upgrades across industries and the renewal of consumer goods such as vehicles and appliances. This initiative is anticipated to generate an extra demand of 8 million tonnes for medium to high-end steel products.
Jiang suggested that the entire steel sector, especially companies producing construction materials, should improve production discipline, reduce output intensity, and eliminate unhealthy competition. He added that the aim is to gradually normalize steel inventory levels by the second quarter.
(Writing by Shengnan Liu Editing by Harry Huo)
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