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Chinese steelmakers’ profits squeezed

Keywords: Tags  China steel, steel production, steel capacity, pollution controls, steel prices


SHANGHAI — China’s steel industry struggled against overcapacity and weak product prices during 2013.

Even though production slowed during the final two months of the year as Beijing tightened environmental regulations to combat high pollution levels, the industry produced a record 779 million tonnes of crude steel for the year, up 7.5 percent from 2012, accounting for almost half of global steel output of 1.6 billion tonnes.

Air pollution was a key topic of discussion in China last year, with its heavy industries coming under increasing pressure to curb emissions.

Hebei came under particular scrutiny. Many steelmakers in Wu’an scaled back production at their rolling mills in early December in response to temporary pollution control measures imposed by the local government ( amm.com, Dec. 11). Electricity supply to mills in the city was reduced by between 30 and 50 percent, a local producer source told AMM sister publication Steel First at the time.

Hebei provincial authorities had announced in September that the region would need to cut more than 60 million tonnes of capacity by 2017 to control pollution ( amm.com, Sept. 13), and more than 2 million tonnes of iron and steelmaking capacity were trimmed in November.

Beijing also has urged greater consolidation in major steelmaking provinces, including Jiangsu, Jiangxi, Liaoning, Shandong and Shanxi.

However, with China’s existing crude steel capacity at more than 1 billion tonnes most market participants have said they believe the efforts fall far short of what’s needed to effectively tackle China’s overcapacity problem ( amm.com, Dec. 30).

Meanwhile, the country’s finished steel exports surged to 62.34 million tonnes last year, up 12 percent from 2012, as mills expanded their overseas markets.

Amid such an oversubscribed industry, very few Chinese steel mills remained profitable in 2013. Those that did succeeded through the expansion of noncore businesses or the sale of assets.

The country’s steelmaking profits averaged just 8.1 yuan ($1.34) per tonne of crude steel during the first 11 months of 2013.

Chinese steel mills also were squeezed by upstream raw material costs. Average seaborne iron ore prices rose 5 percent in 2013 from a year earlier, while average steel product prices fell amid increased output and sluggish demand, with rebar down 8.9 percent year on year.

A version of this article was first published by AMM sister publication Steel First.


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