The steel industry is facing its toughest quarter since the start of the 21st century, with major losses and growing challenges. The sector, which has long been plagued by overcapacity, now finds itself in a precarious position as demand weakens and prices continue to fall.
According to the China Iron and Steel Association (CISA), the average daily crude steel output among its members reached 1.7021 million tons in the second half of April, up 0.77% from the previous period. Meanwhile, the estimated average daily production was 2.2187 million tons, a monthly increase of 0.61%. These figures highlight the ongoing struggle between rising supply and shrinking demand.
In April alone, China produced 68.84 million tons of crude steel, marking a year-on-year increase of 2.1%. The daily average of 2.295 million tons set a new record, signaling continued pressure on the market. However, this surge in output has led to higher stockpiles, worsening the oversupply problem and pushing steel prices lower.
With the real estate sector undergoing deep adjustments, the steel industry is entering what seems like a prolonged downturn. As construction activity slows, demand for steel is expected to remain weak, further squeezing profit margins.
The first quarter saw a sharp drop in steel consumption due to seasonal factors, yet production continued to rise. This imbalance caused a surge in inventory levels, leading to severe price declines and widespread losses across the industry. CISA’s vice chairman, Zhang Changfu, emphasized that this quarter was the most challenging for the sector in over two decades.
Data from CISA shows that in the first quarter, pig iron, crude steel, and steel production rose by 0.14%, 2.37%, and 5.3%, respectively, compared to the same period last year. However, these figures represent a significant decline from the previous year, with production falling by 7.44%, 6.73%, and 7 percentage points, respectively.
Exports of steel increased by 27% to 18.33 million tons, while imports rose by 11.3% to 3.59 million tons. This resulted in a net export of 15.68 million tons, up 31.7% year-on-year. However, export prices fell by 7.37% to $794.06 per ton, while import prices rose slightly, reflecting a challenging trade environment.
Domestic steel prices also declined, with the comprehensive steel price index (CSPI) dropping 11.28% year-on-year to 94.83 points at the end of March. Prices remained low throughout the quarter, with settlement prices falling by 368 yuan per ton, or 10.14%.
Despite the downturn, private investment in the steel industry increased significantly. Fixed asset investment in the sector totaled 89.3 billion yuan, with private investment accounting for 80.18% of the total. This shift suggests that private players are becoming more active in the face of declining public investment.
Steel inventories have also surged, reaching 20.86 million tons by the end of February—up 54.42% from the start of the year. Although inventories decreased slightly in March, they remained 43.65% higher than at the beginning of the year. This indicates a mismatch between supply and demand, with high output and weak demand putting further pressure on the market.
For the first quarter, key steel companies reported a 0.79% drop in sales revenue to 868.887 billion yuan, with profits and taxes falling by 32.46% to 14.647 billion yuan. Net losses reached 2.329 billion yuan, and the loss rate climbed to 45.45%, up 14.77 percentage points from the previous year. The sales margin turned negative at -0.27%, down 0.64 percentage points from the prior year.
As the industry continues to grapple with overcapacity, weak demand, and falling prices, it remains to be seen how long this difficult period will last. For now, the steel sector is under immense pressure, and the path to recovery looks uncertain.
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