Profits scarce for steelmakers in China

Steelmakers in the United States have warned of slimmer profits in the second half of this year compared with robust earnings in 2021 and earlier this year. In China, where the full extent of its economic slowdown can be difficult to parse, steelmakers may have veered into red ink territory.

Reports on the Nikkei Asia and AG Metal Miner websites portray ongoing concerns that the decades long steel boom in the People’s Republic of China is declining from its peak.

On the volume front, figures from the Brussels-based World Steel Association—submitted by the China Iron and Steel Association (CISA)—have shown that mills are producing less steel this year than last year.

What is harder to determine is how much of the steel made actually is being consumed in light of an apartment tower construction sector that has cooled down considerably in 2022.

Nikkei Asia writes that in late July, China’s (and the world’s) largest producer China Baowu Steel Group issued an internal warning pointing to “great challenges,” reduced sales, falling prices and declining profitability. Nikkei cites one of the company’s own social media accounts as its source.

Nikkei estimates as many as 80 percent of China’s roughly 500 mill companies have been running at a loss, citing Beijing-based Mysteel.

Steel producers in the U.S., as well as ferrous scrap exporters, have largely decoupled from the Chinese market. In the United Kingdom, however, China-based Jingye Steel is reportedly seeking “hundreds of millions” of dollars to keep its blast furnaces in England financially viable.

China has been the world’s largest steel producer for a number of years, with AG MetalMiner listing its national capacity at 1.2 billion tons per year. “However, a lack of interest from real estate developers after the real estate crisis has caused many projects to shut down, reducing steel uptake," Mysteel says. "Around 29 percent of Chinese real estate companies claim to be nearing bankruptcy.”

The website says it has spoken to sector analysts convinced China’s demand for steel has peaked, “and all that remains is a slow downward spiral.” The website also notes that Chinese policymakers intend to keep factories humming, but economists are increasingly skeptical about returns on investment in either property development or infrastructure in China.