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China’s Steel Industry Declines as Output Drops

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Published on : Jun 11, 2015

Steelmakers in China reduced output as priced dropped to record lows due to sluggish infrastructure and property construction in the biggest producer in the world. 

The production of crude steel fell by 1.7% in May as compared to the previous year recording 69.95 million tons of production, as per data from National Bureau of Statistics. On a daily basis output dropped 1.8% as compared to April.

The slide is evident of weak domestic demand in China, as the country shifts from investment led development to consumption driven economy, which further deepens slowdown in the construction sector. Steel production in the first few months of the year declined by 1.6%.

The second quarter of the year seems more difficult than the first for steel dependent mills. The apparent domestic consumption, not including exported, has dropped more than 5% in this year and this emphasizes that economic transformation to a new horizon is impacting early-cycle substances such as steel.

The total industrial output in China rose by 6.1% whereas fixed asset investment expanded at 11.4% which is a rate slower than what was expected, as showed by data from the statistics bureau. The construction of new property dropped 16% in the first five months of 2015.

As much as 70% of the steel demand in the country is related to property, machinery manufacturing, and infrastructure, as stated by an analyst at Argonaut Securities (Asia ) Ltd.

Owing to drop in steel production, the prices of steel products have dropped to a 12 year low, which is spurring Chinese producers to either cut output to make for the losses or sell at competitive prices in overseas markets.