Large, mid-sized firms suffer combined losses of $1.78b
China's crude steel output declined 1.7 percent from the previous year to 200.1 million tons in the first quarter amid dropping prices, and the sector will continue to see hard times in the short term, the China Iron and Steel Association (CISA) said Wednesday.
In the first quarter, the country's large and medium-sized iron and steel firms suffered combined losses of 11.05 billion yuan ($1.78 billion) in their main business, CISA data showed.
CISA's China Steel Price Index stood at 75.43 points as of the end of March, falling by 19.4 percentage points year-on-year. Difficult financing and more severe environmental constraints have also added to steel mills' pressure.
The main consumers of steel such as the real estate sector have experienced a slowdown, which is the main reason behind the declined demand and prices of steel, Guo Bin, a manager at Shanghai Keerun Industrial Co, told the Global Times on Wednesday.
The apparent consumption (refers to national production plus net imports) in the first quarter fell by 6.2 percent year-on-year to 177 million tons, CISA data showed. But Guo said that some small steel makers did not reduce their output although there is a decreased market demand in China now.
Zhu Jimin, executive vice chairman at CISA, told the Global Times on Wednesday that the iron and steel industry can benefit from the country's "One Belt, One Road" initiative.
"A large amount of infrastructure construction [expected under the 'One Belt, One Road' initiative] can provide Chinese steel makers with more opportunities," Zhu said, noting that it is a good chance to expand overseas markets.
Zhu's opinion was echoed by Guo, who said that the government's policy stimulus is certainly a boost. "But in the long run, whether the steel industry will benefit from the initiative depends on how long and how hard the Chinese government will promote the 'One Belt, One Road' initiative," Guo said.
There have been concerns that the Chinese government is aiming to export domestic excess capacity through the "One Belt, One Road" strategy. But Zhu said that the cooperation could meet the actual needs of the governments and enterprises in the countries and regions along the routes, helping local governments to build and improve their own steel industry.
CISA also called for more tax reduction for ore mining firms so that they can have a greater price advantage over strong international competitors.
