China's iron and steel body warns of over-capacity and shrinking profits
Singapore
CHINA'S Iron and Steel Association said on Sunday that the industry faces ongoing risks from excess capacity, as well as sluggish demand and increased raw material costs that could squeeze profits.
The country's sprawling steel sector, which has cut 150 million tonnes of steel production over the past three years, was "far from achieving its tasks" amid Beijing's supply-side reforms, the association said in an online statement.
Some companies were looking to boost output, turn out low-grade steel and use cheaper but more polluting induction furnaces, it said, adding that fixed asset investment in the ferrous metal refinery and processing industry rose 30.6 per cent in the first quarter.
The industry should work to avoid any illicit increase in new capacity, reduce leverage and push forward with the restructuring of "zombie firms", the association said.
"Keeping the balance between demand and supply is a key premise for maintaining the stabilisation of the steel market," it said.
It forecast weaker demand for iron and steel due to structural changes in the world's second-largest economy, and said the industry would not be able to sustain high production growth, which saw crude steel output jump 9.9 per cent in the first quarter.
A sharp rise in the price of raw materials in the first quarter, when imported iron ore rose from US$60 a tonne to US$90 a tonne, had also significantly squeezed industry profitability.
The sector is also at the centre of the government's efforts to curb pollution, although complying with stricter standards could raise production costs and hurt profitability, it said.
The association also urged banks to remove restrictions on lending to the industry to help companies obtain financing and lower their costs. REUTERS
KEYWORDS IN THIS ARTICLE
BT is now on Telegram!
For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes
Energy & Commodities
Gold prices set for weekly decline ahead of US inflation data
Pricey coffee is here to stay as hoarding, heat hit Vietnam supply
Oil settles higher as weak US economic growth offset by supply concerns
India's Vedanta misses Q4 profit estimates on lower prices
BHP targets Anglo American in bid valuing miner at US$39 billion
China's Sinopec charts global expansion with refinery in rival India's backyard