China Steel Industry Faces Difficulties and Challenges in 2023
Steel NewsDate: 19-07-2023 by: Nhu Quynh
Weak business results due to the gloomy real estate market forced businesses to cut costs to maintain operations. These are the difficulties and challenges that the China steel industry has to face.
Recently, China's large steel enterprises have announced that their business profits have decreased. It also mentioned obstacles that China steel enterprises are expected to face in the second half of this year. It is known that the reasons for these obstacles stem from low consumption demand and pressure to cut costs.
According to the China Iron and Steel Association (CISA), this industry has reached a critical turning point in demand. CISA also concurs with the view of low consumption and persistently thin margins.
In the first 5 months of the year, nearly half of China's giant steel mills had a loss in business results; although the number of orders increased, sales still declined. These are also two big problems that China's steel enterprises have to face at this time.
China is known as the country with the most developed steel industry in the world, with more than 50% of steel production being produced in Chinese factories. However, the majority of input materials for steel production are imported from Australia and Brazil.
China's steel market has just recovered due to the impact of the COVID-19 epidemic and the crisis in the real estate market. The real estate market and infrastructure construction account for about 60% of China's steel demand. However, infrastructure investment stimulus programs have slowed, while the real estate market is also growing slowly. Meanwhile, the Chinese government continues to encourage mergers and cuts to address persistent oversupply. It can be said that China's steel industry is undergoing reform, but progress is relatively slow.
The Chinese government has not yet taken drastic measures to boost the country's domestic demand for steel. The profit of the steel industry is low, but the price of input materials for steel production is relatively high. This affects steel prices, leading to a gloomy domestic consumption market.
In the context of weak domestic demand, forcing China steel enterprises to boost exports. However, the fact that factories boost exports to free up inventories means that selling prices are continuously falling. In May, the country's steel export price fell below $1,000 per ton ($920 per ton).
According to a report by Marubeni Research, the level of oversupply (determined by subtracting consumption from crude steel production) in the first five months of 2023 has reached the highest level in the past seven years of the China steel industry.