Luo Bingsheng, the executive vice president of the China Iron and Steel Association (CISA), has recently stated that, now that structural adjustment and industrial upgrading have become urgent in the Chinese steel industry, domestic steel enterprises should take advantage of this opportunity to develop a low carbon economy and accelerate the construction of a ‘green' steel industry.
Mr. Luo outline three big problems which the Chinese steel industry is currently facing. First of all, overproduction issue is causing a disturbance in the domestic industry. According to the statistics, in the first five months the daily output of crude steel stood at 1.7808 million mt in China, up 14.5 percent compared to the same period of last year. The growth in steel production has resulted in a surplus supply of steel products in the domestic market.
Secondly, steel exports surged while imports dropped down significantly. During the January-May period, Chinese exports of finished steel and semi-finished products have indicated an increase of 127.9 percent when adjusted into crude steel volume, while imports of these products were down 16.78 percent when adjusted into crude steel volume. However, under the influence of the cancellation of the tax rebate for certain steel products by the Chinese government, more products will be distributed within the domestic market as exporters' profit margin will be under pressure from the rebate removal. Thus, the problem of excess supply in relation to demand will be aggravated.
Thirdly, the domestic steel industry has seen a relatively bad performance during the first five months of 2010. Based on the data collected by the CISA after a survey of the seventy-seven large and medium sized steel enterprises in the country, the aggregate net profit achieved by these enterprises was RMB 44.327 billion for the period in question, compared with a net loss of RMB 3.29 billion in the corresponding period of last year. However, the overall profit margin was only 3.67 percent, lower than the average profit margin of six percent recorded among 35 domestic industrial sectors.