The world’s biggest steel producer sounded the alarm about a crisis in China that carries the potential to send global shock waves, warning of a deeper industry downturn than major events in 2008 and 2015.
Conditions in China are like a “harsh winter” that would be “longer, colder and more difficult to endure than we expected,” China Baowu Steel Group Corp (寶武鋼鐵集團) chairman Hu Wangming (胡望明) told staff at the company’s half-year meeting.
For commodities including steel, the warning from Baowu underscores risks to demand and prices, as well as what ArcelorMittal SA, the No. 2 firm in the industry, called an “aggressive” surge of exports from China.
Photo: AFP
China’s steel market — by far the world’s largest — is flashing multiple warning signs as the protracted property downturn shows no signs of ending, while factory activity remains subdued. Baowu alone produces about 7 percent of the world’s steel, and its commentary is closely tracked to gauge the market mood in the Asian nation.
Hu’s stark message would likely be a worry for rivals across Asia, Europe and North America as they grapple with a fresh wave of Chinese exports, often by pushing for trade measures. Shipments from China are on track to reach about 100 million tonnes this year, the highest since 2016, as producers there scramble to offset a domestic slowdown.
German steel giant ThyssenKrupp AG yesterday highlighted the industry’s challenges by reporting a big slump in earnings. Earlier this month, ArcelorMittal said that China’s rising exports had put the global market in an “unsustainable” condition.
China’s steel industry experienced devastating slumps during the global financial crisis of 2008 and 2009, and again in 2015 and 2016. In both cases, the crises were ultimately resolved by massive stimulus — a prospect that looks more remote this year as Chinese President Xi Jinping (習近平) bids to reshape the economy.
Baowu did not offer much on the causes of the downturn, focusing on how employees should respond: by preserving cash and minimizing risks.
“Financial departments at all levels should pay more attention to the security of the company’s funding,” with a need to strengthen controls, including for overdue payments and detecting fake trades, the statement said.
“In the process of crossing the long and harsh winter, cash is more important than profit,” it said.
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