The gross profits recorded by the Chinese steel industry moved on a declining month-month trend in the first four months of the current year, with monthly figures of RMB 1.3 billion ($210 million), RMB 1.0 billion ($162 million), RMB 260 million ($42 million) and RMB 150 million ($24 million) respectively from January to April, as stated by Wang Xiaoqi, deputy chairman of the China Iron and Steel Association (CISA), who was speaking at the 10th Shanghai Derivatives Market Forum.
Mr. Wang went on to state that overcapacity is the main negative factor impacting the Chinese steel sector, while adding that since the fourth quarter of 2011 the primary business of the Chinese steel industry has recorded net losses, with the biggest net loss being the RMB 16.5 billion registered in the third quarter last year. The small profits recorded by some Chinese steelmakers are mainly from their mining businesses and non-steel investments, he said.
Mr. Wang continued by saying that in the first four months this year China's total crude steel output amounted to 258 million mt, up 8.4 percent year on year, with half of the added output directly entering warehouses. He said that steel demand this year is moderate and is lagging behind the increases in output.
The implementation of stricter environmental protection standards issued by China's Ministry of Industry and Information Technology (MIIT) is expected to be one of the main means of solving the problem of overcapacity in the steel industry, Mr. Wang added.
Meanwhile, also at the forum, Ye Chunhe, vice general manager of Shanghai Futures Exchange, stated that, following its successful launch of rebar futures, Shanghai Futures Exchange is preparing to launch hot rolled coil (HRC) futures, while it is also developing an iron ore futures price index.