In the first half of this year, the steel industry continued to operate at a high production level. Despite the persistent oversupply in the market, steel prices remained volatile. With rising costs, the economic performance of enterprises declined month by month, and the profitability of the steel sector reached its lowest point compared to other industries.
**Industry Operations**
1. **High Steel Production**: From January to June, the cumulative output of pig iron, crude steel, and finished steel products was 357.54 million tons, 389.87 million tons, and 516.96 million tons, respectively, showing increases of 5.7%, 7.4%, and 10.2%. The average daily crude steel output reached 2.15 million tons, equivalent to an annual capacity of 786 million tons.
2. **Continued Growth in Exports**: China's total steel exports for the first half of the year reached 30.69 million tons, up 12.8% year-on-year. Imports, however, dropped slightly to 6.83 million tons, a decrease of 1.8% compared to the same period last year. Meanwhile, steel billet imports rose sharply by 53.5%, while steel billet exports increased by 21.3%.
3. **Fixed Asset Investment Grows**: Total fixed asset investment in the national steel industry reached 303.5 billion yuan from January to June. Ferrous metal mining saw an increase of 7.8%, while smelting and rolling investment grew by 3.3%, though both were lower than previous years.
4. **Steel Inventories Decline**: After reaching a peak in March, steel inventories fell for three consecutive months. By the end of June, total steel stocks in major markets stood at 16.91 million tons. Although inventory levels dropped in Q2, they still increased by 4.69 million tons from the start of the year, representing a 39.46% rise.
5. **Steel Prices Continue to Fall**: Steel prices have been declining since February, with the composite index falling for 18 consecutive weeks to 98.52 points by June. This marked a 6.4% drop from the beginning of the year and a 14.7% decline from the same period last year—its lowest level since November 2009.
6. **Economic Performance Deteriorates**: Large and medium-sized steel companies saw monthly profit declines. Total sales revenue reached 1.783 trillion yuan, up 0.94%, but profits only rose 30.4% to 17.39 billion yuan. The profit margin was just 0.10%, and 35 out of 86 key companies reported losses, totaling 40.7% of the group.
**Future Outlook**
**High Crude Steel Output Expected**: Although daily crude steel output dropped in June for two months in a row, it remained high. With declining profits in the first half, the entire industry may face losses in June. It is expected that crude steel output will slow in the second half of the year, with an estimated annual production of around 780 million tons.
**Market Pressure Remains Strong**: While demand for steel started slowly in Q1 and picked up in Q2, macroeconomic policies remain stable, and there is no significant stimulus for steel demand. As a result, domestic demand growth in the second half of the year is expected to be limited, increasing pressure on steel prices.
**Export Challenges Increase**: Recent anti-dumping investigations by the U.S., Canada, Australia, and ASEAN countries have made steel exports more difficult. These actions are expected to slow export growth, with annual steel exports projected to reach 61.5 million tons, up about 10% from the previous year.
**Low Profitability Likely to Continue**: By the end of June, the domestic steel price index had fallen 6.4% from the previous year, while import iron ore prices rose by 8.3%. Despite cost reductions in raw materials like coking coal, the pressure from rising iron ore costs remains high. Steel companies will continue to face challenges in cost control and efficiency improvement throughout the year.
**Rising Business Risks**: At the end of May, large and medium-sized steel companies had borrowed 1.2813 trillion yuan, up 7.54% year-on-year. Total liabilities exceeded 3 trillion yuan, with an asset-liability ratio of 69.39%. As more companies incur losses and debts grow, financial institutions are tightening their oversight, increasing the difficulty and cost of financing and raising business risks.
Due to slowing macroeconomic growth and overcapacity, the outlook for China’s steel industry in the second half of the year remains uncertain. Additionally, environmental concerns and stricter regulations are pushing the industry toward sustainable development. In this challenging environment, the steel sector must focus on structural optimization, improved operational quality, and balanced growth across scale, variety, efficiency, energy conservation, and environmental protection.
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