China’s steel crisis is setting the stage for a wave of bankruptcies and speeding a much-needed consolidation of the industry, Bloomberg Intelligence (BI) said.
Almost three-quarters of the country’s steelmakers suffered losses in the first half of this year and bankruptcy is likely for many of them, Bloomberg Intelligence senior analyst Michelle Leung (梁穎璋) said in a note.
Xinjiang Ba Yi Iron & Steel Co (新疆八一鋼鐵), Gansu Jiu Steel Group (甘肅酒鋼集團) and Anyang Iron & Steel Group Co (安陽鋼鐵集團) face the highest risk and could be potential acquisition targets, she said.
Photo: Aly Song, Reuters
The wave of consolidation would help Beijing encourage more concentration in its steel industry, Bloomberg Intelligence said.
The government wants the top five companies to control 40 percent of the market by next year and the top 10 to account for 60 percent.
These targets look “achievable,” although China would still be well behind South Korea and Japan in this respect, Leung said.
China’s persistent property crisis and flagging economic growth are reshaping the country’s massive steel industry, with the head of its biggest producer, China Baowu Steel Group Corp (中國寶武鋼鐵集團), warning last month of a crisis worse than in 2008 and 2015.
A slump in domestic demand has meant mills have increased exports, spurring a trade backlash from countries who say the metal is being dumped at below cost.
However, China’s steel exports are not likely to decline until the end of 2026, as total production falls and more trading partners step up restrictions, Bloomberg Intelligence said.
China’s housing rescue package offers the best path for putting the country’s economy on track to expand about 5 percent, in the view of most economists, assuming it is deployed to maximum effect in the face of a real-estate crisis expected to last as long as five more years.
China’s banks might carry out a new round of mortgage rate cuts this year to help shore up flagging consumption, the Securities Daily reported, citing analysts.
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