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Data released by the China Iron and Steel Association reveals that from January to September, major steel companies incurred a loss of approximately 5.528 billion yuan, compared to a profit of 83.692 billion yuan during the same period last year. Losses for loss-making enterprises amounted to 26.726 billion yuan, representing a staggering 41.5-fold increase year-over-year. The loss ratio surged to 45%, up by 38.75 percentage points compared to the previous year.
Despite these challenges, there are signs of improvement for steel companies since October. Wang Xiaoqi noted that after iron ore prices reached a low point in September, numerous steel firms ramped up their imports. Many contracts signed in September were executed in October, leading to a significant drop in iron ore prices—approximately RMB 120 per ton. Consequently, the operating costs for steel companies have decreased. Additionally, steel product prices have experienced a modest uptick, increasing by around 150 yuan per ton compared to September. This balance between falling input costs and rising product prices has helped improve profitability for steel firms in October.
Looking at production figures, data from the China Iron and Steel Association shows that large steel mills have already begun voluntarily reducing output. From January to September, member steel enterprises under the association cumulatively produced 439,506,100 tons of steel, a decline of 9.1847 million tons compared to the same period last year, representing a decrease of 2.04%. Since July, member steel companies have implemented output reduction strategies and maintenance measures to manage production levels. Monthly production figures in July, August, and September consistently declined, with a 8.39% reduction in September compared to June. Non-member companies, however, continued to expand production.
On the demand side, China’s apparent crude steel consumption from January to September this year totaled 510.2761 million tons, an increase of 3.3026 million tons—a mere 0.65% growth, down by 9.73 percentage points compared to the same period last year. This slowdown can be attributed to multiple factors, including negative growth in railway construction investments and real estate (new starts), as well as significant declines in the shipbuilding industry's completions, new orders, and hand-held orders. Weak growth or declining rates were also observed in the machinery, automobile, and home appliance industries.
The China Steel Association anticipates a potential rebound in steel product demand in the fourth quarter. With the National Development and Reform Commission approving 25 new urban rail transit projects and 13 highway projects in September, the number of new railway projects jumped from 9 at the start of the year to 22, and railway fixed asset investment rose from 516 billion yuan to 630 billion yuan. These developments are expected to drive a substantial increase in national fixed-asset investment in the fourth quarter, propelling demand in the steel market and reversing the weak performance seen in the first three quarters.
Wang Xiaoqi, deputy head of the China Iron and Steel Association, remarked that steel companies are likely to report profits in October, with potential for further gains in November and December. Overall, he believes the industry might avoid losses for the entire year. However, deep-seated issues persist in China’s steel sector. Excess capacity and the dominance of iron ore suppliers remain significant constraints on the industry's growth. Financial speculation exacerbates these challenges. While overcapacity remains unresolved, the steel industry faces an uncertain future. Nevertheless, pressure from iron ore prices is gradually easing. A downward trend in iron ore prices is now widely accepted within the industry. Domestic mines are accelerating expansion efforts, with projections indicating a potential increase of 80 million to 1 trillion tons in domestic iron ore supply by 2016. Overseas equity mining investments are also expected to bolster global iron ore supply.