The crisis engulfing the global steel industry is so severe that one of China’s top producers has warned that a new “ice age” has set in as mills confront overcapacity and rising competition that threaten their survival.
“In 2015, China experienced a slowdown in economic growth and excess steel capacity, which caused the domestic and overseas steel industry to enter into an ice age,” Angang Steel Co (鞍山鋼鐵) said after posting a net loss of 4.59 billion yuan (US$710 million) for last year.
There are severe challenges, fierce competition and difficult survival conditions, it said.
Steel demand in China is shrinking for the first time in a generation as growth slows and policymakers seek to steer the economy toward consumption. Faced with declining sales at home, mills in the top producer have shipped record volumes overseas, heightening competition from Europe to the US.
Tata Steel Ltd in India this week said it is planning to sell off its loss-making UK plants.
The steel industry is set for a “severe winter,” Angang said, describing the market that it and others face as “complex.”
Output of steel by the country’s fourth-biggest producer contracted 4.4 percent last year and the company is seeking to reduce costs and boost efficiency, it said.
Other results from China showed the extent of the downturn. Baoshan Iron & Steel Co (寶山鋼鐵), China’s second-biggest producer, posted an 83 percent slide in net income last year, while Chongqing Iron & Steel Co (重慶鋼鐵) swung to a net loss of 5.99 billion yuan from a profit a year earlier.
As China’s steel demand dropped and prices sank last year, mills in the country churned out less year-on-year for the first time since 1981.
Crude-steel production fell 2.3 percent to 804 million tonnes last year, official data showed.
Output might drop to about 783 million tonnes this year, according to a China Iron & Steel Association forecast.
“On the whole, the steel sector is still a sunset industry,” said Zhao Chaoyue (趙超越), an analyst at China Merchants Futures Co (招商期貨) in Shenzhen, adding that it was appropriate to use the ice age term, as the entire industry lost money last year.
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