Wang Xiaoqi, deputy chairman of the China Iron and Steel Association (CISA), has stated that, considering an average net profit of only RMB 1.68/mt ($0.26/mt) for steel production in China in July this year, the Chinese iron and steel industry has been facing increasing difficulties and the situation may not indicate any improvement in the last quarter of this year or the first quarter next year.
"We were still able to see a net profit of RMB 50/mt ($7.9/mt) in the steel industry amid the global economic crisis of 2008. However, the net profit in July decreased sharply to RMB 1.68/mt ($0.26/mt) from RMB 6.8/mt ($1.07/mt) for the first half of this year." Mr. Wang stated.
Meanwhile, the CISA official stated that high steel inventory volumes will continue to negatively impact the net profits of the domestic steel industry. According to a CISA survey of 22 cities in China, steel inventory volumes of traders are currently estimated to be at 60 million mt, or even as high as 70 million mt, and, when steelmakers' inventories are taken into consideration, total steel inventory may reach 100 million mt.
Mr. Wang stated that currently only mining investments, financial investments and non-steel business investments can cause a turnaround in the general loss-making situation of most steelmakers in China. The time for competition in terms of volumes in the steel industry has gone, he said. He added that Chinese domestic steel demand is expected to remain in the range of 600-700 million mt in the coming 10-15 years.