China’s steel mills turn profitable despite headwinds

Latest data shows that China’s major steel mills turned profitable in March, reducing their first quarter losses to 8.75 billion yuan ($1.35 billion), according to the China Iron and Steel Association (CISA).

The CISA, which represents China’s biggest steel enterprises, said that while its members saw their fortunes rebound in March after months of losses, “the trends facing the sector remained difficult”, with steel product prices expected to drop again in the coming months.

The association said last month that its members made losses of 11.4 billion yuan in January and February.

Prices have improved this year as mills and traders began to restock ahead of the second quarter, when increased construction activity usually spurs an increase in demand for steel products such as reinforcing bar, or rebar.

CISA said last month that the price increases were unsustainable because producers were still caught in a “vicious circle” whereby an increase in prices prompts mills to produce more which only worsens China supply glut and drags prices back down again.

Chinese steel production rose to a record 70.65 million tonnes in March, despite efforts by the government to reduce overcapacities that has seen producers dump cheap steel in overseas markets.


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