Chinese steel association paints gloomy picture

A report posted to the website of the Beijing-based China Iron and Steel Association (CISA) spells out some of the difficult conditions facing steelmakers in that nation.

The report (in Chinese), presented in the form of a letter from CISA Chairman Zhang Guangning, spells out the “serious decline” of an industry sector facing “extremely difficult” conditions in the first 11 months of 2015. Zhang writes that “members of the [association] realized sales income of RMB 2.67 trillion ($405 billion), down 19.32%” from the same period in 2014.

Zhang also refers to reduced profits at some CISA member firms and to 10 steelmakers who lost a combined RMB 49.5 billion ($7.5 billion) during the time frame, “11.88 times the losses of the same period [in 2014].” Zhang said the “the degree of loss-making [at these] enterprises increased, [and] the overall situation has deteriorated further.”

The CISA chairman cited several reasons for the unprofitable conditions, with the foremost relating to a contradiction between a decline in demand and existing overcapacity. “As China's economic development has entered a new normal, steel consumption per unit of GDP intensity will decline further in the next longer period of time [and] consumption’s continued upward trend will end,” writes Zhang, adding that the industry, “overall [has] entered a downward spiral [and the] capacity/output/demand imbalance has become a prominent contradiction.”