Steel industry barely returns to profits

China's steel industry swung back to report profits in the first quarter after recording losses in the same period of last year, an industrial association said Saturday.

Large and medium steel companies saw their situation improve slightly in the first quarter, with sales revenues adding 0.94 percent year on year to 875.85 billion yuan (140.8 billion U.S. dollars), according to data released by the China Iron and Steel Association (CISA).

The combined profit of CISA member companies rebounded to 2.49 billion yuan in the January-March period, with a profit margin of 0.28 percent, compared with 1.03 billion yuan in losses last year, according to the CISA.

However, 34.9 percent of the 272 member companies still reported losses in the first quarter. In March alone, 45.3 percent of steel companies were in the red, suggesting that the sector remained weak due to fiercer competition amid industrial overcapacity, said Zhu Jimin, executive vice president of the CISA.

Steel output continued to grow in the first quarter, even though China has retained its position as the world's largest steel producer, with steel production in the country equal to the rest of the world's combined output.

Crude steel output rose 9.1 percent from a year earlier to 191.89 million tonnes, cast iron output expanded 7.6 percent to 178.23 million tonnes, and rolled steel output jumped 12.3 percent in the period.

The average daily crude steel output leaped to a record-high 2.13 million tonnes.

"The figures have exposed many problems facing the steel sector," Zhu said, pointing to worsening oversupply in the market, rising stockpiles and more trade friction cases with foreign countries.

Overcapacity has been a longstanding problem for the energy-inefficient and polluting sector, as local governments generally prefer to increase the size of local steel companies to drive local economies.

About 44 percent of the 272 CISA member steel companies are located in northern China, which covers Beijing, Tianjin, Hebei, Shanxi and Inner Mongolia.

China's crude steel output grew 3.1 percent to 716.54 million tonnes in 2012, down 5.8 percentage points from a year earlier.