CHINA TOPIX

Updated 11:29 AM EDT, Tue, Jun 16, 2020

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China Major Steel Companies Facing Decreasing While Steel Mills Profit Drops

Steel Mill
(Photo : Image by 272447 from Pixabay )

Image by 272447 from Pixabay

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Chinese steel companies released profit records indicating significant losses during the first quarter of 2020. These companies reported more than a 50 percent drop in their combined net profits in the first quarter of 2020. They, however, maintained steady production during the same quarter but are hurt by sliding steel prices due to disrupted demand.

According to Caixin Global, Chinese steel companies in China are currently suffering from significant losses caused by declining demand for the industry's products. The report claimed that these companies reported more than a 50 percent drop in their combined net profits amounting to 18.3 percent billion yuan for the first quarter of 2020.

According to the China Iron and Steel Association, steelmakers continue to enjoy steady production of industrial products from January to March of 2020. Still, they are suffering from the dropping steel prices caused by weakened demand. The report also claimed that the pandemic effects to the economy adversely affected the demand for industry products and that companies may suffer more profit losses for the rest of the year.

On the other hand, Hellenic Shipping News reported that China might commission more than 50 million metric tons on an annual basis of new hot-strip mill capacity in the next two years. The industry continues to suffer from pressure caused by flat steel prices due to manufacturing downturns. Last Wednesday, S&P Global Platts estimated that it could still increase its production capacity for the rest of the year.

The calculations showed that the production capacity of 22.6 million metric tons per year and another eight hot-strip mills with a total capacity of 28.2 million metric tons per year for 2021 is expected. The new projects were said to be derived from the 26.5 million metric tons per year of new capacity first estimated in 2019.

Over the three years, China may increase its capacity up to 77.3 million metric tons per year as the new flat steelmaking capacity threshold. The industry continues to suffer both in China and overseas. The adverse effects of the pandemic to the Chinese and global economy have decreased customer activity and demand at the same time. As a result, low steel demand from manufacturing may remain low for the rest of 2020, especially since the auto sector is also suffering from lowered product demand.

China's output of medium-wide hot-rolled coil, on the other hand, improved by 11 percent on an annual basis to 39.85 million metric tons during the first quarter of the year. According to data released by the National Bureau of Statistics, some market sources contributed to the improvement of the values such as the HRC capacity expansion despite lockdowns imposed in the country.

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