Major China steelmaker sees limited relief for troubled industry
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THE challenges that have hit China’s steel industry in the first half are likely to persist for the rest of the year, according to one of the country’s top producers of the metal.
Shrinking demand, supply shocks and virus-related impacts have added to pressures on the sector, Angang Steel said in an earnings release late on Friday (Aug 26). The steel giant, which has suffered from China’s property market crisis, reported net income had contracted nearly 70 per cent in the first half.
The warning comes as rising inventories and falling margins point towards worsening prospects for the steel industry. Demand is likely be the major headwind for mills, with economists becoming more bearish on China, and downgrading their 2022 growth forecasts.
State-directed measures to stabilise the economy will likely help consumption to recover gradually in second half, but the future of the industry is still subject to considerable uncertainties, Angang said in a statement. The panic over a potential global recession has led to a steep drop in steel prices since June and caused company losses across the sector, it said.
Angang aims to respond to the softer market by cutting costs, including procurement, and strengthening cash management to prevent liquidity risks, it said.
China is continuing to adhere to a strict Covid Zero policy, with another city near Beijing facing a partial lockdown following 25 reported local coronavirus cases on Saturday. The risk of repeated virus-related lockdowns means there could be more delays to construction projects.
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Iron ore futures in Singapore fell 3.1 per cent to US$102.40 ton as of 1.00 pm local time after rising 4.8 per cent last week. Prices in Dalian dropped 3.3 per cent, while steel rebar and hot-rolled coil declined in Shanghai. BLOOMBERG
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