CHINA TOPIX

Updated 4:59 PM EDT, Fri, Oct 11, 2019

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China's Steel Industry Expected to Decline Despite Production Upsurge

3 Percent Increment in Steel Production Could be Short-Lived

(Photo : Getty Images/ Sean Gallup) The steel industry took advantage of the steel production's meager surge, but was impeded by the government prior to its initiative to cut excess capacity and reduce discharge.

China's steel production in March grew by three percent for the first time since January last year, the National Bureau of Statistics said. 

Analysts said that the rise is perceived to be short-lived and may result in soaring expenses due to the expanding Australian dollar and increasing oil prices.

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China's GDP  grew by 1.1 percent in the first quarter of the year from 2015's October to December period. This shows how the government managed to spur steel demand by boosting the manufacturing, housing, and construction sectors.  

Fitch Ratings said that easing economic conditions in the country stimulated steel demand. Cumulative financing was 2.34 trillion yuan in March, indicating a stabilizing financial system. There was also a surge in home sales by 71 percent last month while investment in real-estate development rose to 602 percent in the first quarter of 2016.

The steel industry took advantage of the steel production's meager surge, but was impeded by the government prior to its initiative to cut excess capacity and reduce discharge, said Su Feng, general manager for sales in the Anyang Iron & Steel Co.

With that, the effort to boost steel supply and take advantage of the price surge may result in a plunge as production once again exceeds demand.

"Given time, output will be raised to a level that tips the market back into oversupply," said Xu Xiangchun, chief analyst at Mysteel Research. "China's steel industry remains in severe overcapacity, so a glut will return."

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