Steel industry slump set to continue: analysts
Friday, 17 February 2012 | 00:00
Imported iron ore stocked in harbors remains at a high level, indicating the slump in demand for steel production in China, and the picture is unlikely to change this year, analysts said.
By February 13, the stock of iron ore stored in 25 harbors in China hit 99.97 million tons, Xinhua-China Iron Ore Price Index showed Tuesday.
"It (the high stock level) is within expectations as domestic steel producers have had low productivity for the past few months," said He Rongliang, a steel market analyst at the Distribution Productivity Promotion Center of China Commerce.
According to China Iron and Steel Association (CISA), the daily output of crude steel by Chinese steel producers reached a two-year low in mid-January at an estimated 1.67 million tons, a 1.3 percent dip month-on-month.
Unlike previous years, "the stockpiling of iron ore by domestic steel makers in preparation for March steel production didn't happen in the winter of 2011 due to financing difficulties, slumping prices of steel and the unclear picture for 2012," Hou Zhiyun, director of Beijing Lange Steel Information Research Center, told the Global Times.
Due to lower demand as a result of the slowing economy and tight liquidity, steel prices have been plunging since last October, leaving steel mills with marginal profits or making losses. Major mill Angang Steel, for instance, announced a net loss of some 2.2 billion yuan for 2011 due to rising raw material costs.
Given the annual increase in steel production in late March, demand for steel and iron ore is expected to rise slightly. However, demand in the long run, which depends more on macroeconomic policy, may not grow a lot, said Hou. "Demand in the manufacturing sector will continue to slip and exports of steel are expected to shrink," she noted.
CISA Chairman Zhu Jimin said last month that the possibility of losses and meager profits for steel mills is likely to increase this year as increased costs, falling demand and financing difficulties will continue to weigh on the sector.
Source: Global Times