China’s steel woes to continue for long, industry body warns

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China’s steel woes are unlikely to end soon, with demand set to decline further in 2016 and beyond, the head of the China Iron and Steel Association (CISA) said.

Zhang Guangning was quoted as saying at a CISA meeting that demand will face a downwared trend for a fairly long period of time in the future, according to a transscript posted on the China Metallurgical News (CMN) website.

Capacity, output and demand imbalance will be an acute problem., Zhang said, as China makes a shift from a manufacuring oriented economy to a services and consumer-led economy.

“As our nation’s economy enters a ‘new normal,’ the steel-intensity of our economic output will continue to fall,” the CNM website quoted him as saying. “In years to come, apparent consumption will see a slow reduction trend … resulting in severe imbalances among production capacity, output and consumption.”

China produces about half of the world’s steel, but a slowing economy has meant a drop in consumption and a need to export more to keep the factories and jobs in place. New steel mills during the boom years have also come onstream, rasing prodcution capacity to a record 1.2 billion tonnes and adding to the glut.

Zhang said exports, which rose 22 percent in the first 11 months of 2015 to 102 million tonnes, will face more headwinds as other countries introduce import restrictions. Domestic steel makers in India and the United States, among others, are up in arms and pushing their governments to slap high anti-dumping dutties on Chinese imports.

The steel market in China is also plagued by mounting losses and an imbalance in its geographical spread and the type of products it offers, Zhang said. The top-10 loss-making producers have seen their losses widen nearly eleven-fold in the first 11 months of 2015 versus a year ago, he added.

The association’s 300-plus steel mill members – half of them loss-making – recorded a combined net loss of 53.1 billion yuan in last year’s first 11 months as sales shrunk 19.3 per cent to 2.67 trillion yuan on falling steel prices.

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