Has China's steel industry bottomed?

When entering the second half of the year, the profit of the steel manufacturing industry has dropped seriously. In fact, less than 20% of companies announced a profit in July, much lower than 80% in March.
China's steel industry is facing precarious financial situation and dismal demand. Moreover, a large part of financial and securities analysts around the world have also forecast the steel industry crises will get worse as China prepares to face a harsh winter, according to OilPrice. .

But that's only half the story. A downward financial spiral hit China's economy hard. And steel is the industry hardest hit. The current crisis began about a year ago when Evergrande announced it could not pay its $300 billion debt.

This event alone was enough to create a panic attack. But the speed at which the Chinese authorities reacted made the situation worse. A few months ago, the government announced a new fiscal stimulus measure. However, many experts say the move is too late, with China's industries already reeling from COVID-19 outbreaks and frequent power outages.

Experts say that China's economy is getting weaker and weaker. Despite the fact that the government is spending money on infrastructure construction, the actual growth target is unlikely to reach 5.5%.

China's steel industry and companies that provide raw materials such as iron ore are facing a bleak future. When entering the second half of the year, the profit of the steel manufacturing industry has dropped seriously. In fact, less than 20% of companies announced profits in July, much lower than 80% in March. In recently released forecasts, only about 5 out of 25 steel companies. Domestic listings estimate profits will increase in the first half of the year.

China is not only one of the world's largest steel producers with an output of over 1 billion tons, but also the largest steel consumer. In which, domestic companies meet 95% of steel consumption demand in the domestic market.

At present, China's steel production energy is 1.2 billion tons/year with annual consumption of about 1 billion tons. However, the lack of interest in new projects by real estate developers after the last crisis reduced steel demand. Real estate and auto manufacturing are two of China's biggest steel consumers. Meanwhile, 29% of Chinese real estate companies declared bankruptcy.

Key players in the steel industry, including Baowu, a state-owned steel producer, warned at an internal meeting of major challenges due to falling sales. Meanwhile, Chinese officials are also trying a variety of measures to stimulate economic growth.

Along with the fiscal stimulus, the government also established China Mineral Resources Corporation to replace the purchasing power of domestic steel companies and enhance Beijing's position in the global commodity market. purchasing raw materials for steel production.

This is not the first time that China, which buys about 70% of its iron ore volume from sea, has tried to expand its control over the iron ore market more.

Some experts are skeptical whether the steel market has bottomed out as demand has peaked since 2021 and is still in decline. However, with China's financial crisis, the government is still struggling to find countermeasures to the decline of the steel industry.

Vietnambiz