Steel Industry Fortunes Revive As Product Prices Gain Traction

- Oct 18, 2018-

Steel industries in China have witnessed a revival of fortunes during the first nine months of this year and are on track to continue the performance into the first few months of next year also, experts said on Wednesday.

The strong performance has largely been due to higher product prices and reduced supplies due to the overcapacity cuts and production curbs to protect the environment, experts said. They added that steel production may be further curbed during the winter and spring as more local governments come out with fresh plans to curb pollution.

Of the 16 listed steel companies that have announced their earnings numbers till Oct 14, all of them saw an increase in profitability and earnings, with the growth in most cases being in excess of 50 percent, according to data from information provider Wind Info.

Steel major Angang Steel Co Ltd said its total profit for the first three quarters was roughly 8.62 billion yuan ($1.25 billion), an increase of 123 percent over the same period a year ago.

"The main trigger for the better performance is the overall decrease in steel production and supply," said Xu Xiangchun, information director and analyst with iron and steel industry consultancy

"The industry has been seeing a decrease in overall product supply for the past two years, especially this year, due to overcapacity cuts and caps on production activities, which resulted in relatively high steel prices."

"Besides, reduced production leads to less demand for raw materials, and this results in lower raw material prices that further contributes to steel companies' profitability."

Steel prices have surged to the second highest level since October 2011-the previous highest was at the end of last year, said Wang Guoqing, research director at Lange Steel Information Research Center, who considers the production curbs key to higher prices.