Chinese Steel Continues to Fall Sharply

China , Commodities , Metals , Steel Aug 21, 2012 No Comments

Chinese steel production may contract in 2012 for the first time in 33 years.

SteelMajor Chinese steelmakers will again lower their prices in September, the third consecutive monthly decline. According to a fact sheet published mid-August, Baosteel, the largest Chinese steelmaker, will reduce the prices of its products from 80 to 180 yuan, or 10 to 23 dollars.

Overall decline since August 1st reached 12.5%.

The steel market may stabilize in the next two months, but demand remains weak, prices are not ready to rebound,” said Essence Securities analyst. Especially since there is little chance that the central government will inject more money into major construction projects in the second semester.

Since April, the average decline in steel prices has been 17%. Plagued by overcapacity and declining demand in construction, machinery and appliances, prices have fallen to their lowest level since November 2009. Profits of steelmakers in the first half of this year have plunged 96%, according to the China Iron and Steel Association (CISA).

To curb this trend, 58 blast furnaces were idled in early August, decreasing production by 145,000 tons. In July the Chinese steelmakers produced 1.99 million daily tonnes (Mt) against 2.01 Mt in the previous month.

Weak global demand has prevented steelmakers from using exports to offset the decline in consumption in the domestic market. Sales abroad fell by 23% in July compared to June. In the second semester, production could fall by 10% compared to the first. It may fall between 1.85 and 1.90 Mt already in August. According to projections from the National Bureau of Statistics, China‘s steel production could actually fall 0.7% in 2012 to 678.68 Mt, its first decline in three decades.

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Pascal Blanc

Pascal has implemented numerous software solutions in the areas of procurement, sourcing, spend management, supplier evaluation and performance. His clients include Fortune 500 companies in Europe, Asia and North America. He is a co-founder of Source & Procure.

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