In the first half of this year, the steel industry continued to operate at a high production level. Despite efforts to address market oversupply, prices for steel products remained volatile. With rising costs, the economic performance of companies declined month by month, and the profitability of the steel sector reached its lowest point in recent years.
**Industry Operations**
1. **High Steel Production**: From January to June, the cumulative output of pig iron, crude steel, and steel products reached 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 was 2.15 million tons, equivalent to an annual capacity of 786 million tons.
2. **Growing Exports**: China's steel exports rose to 30.69 million tons during the first half of the year, up 12.8% from the previous year. Imports, however, decreased slightly to 6.83 million tons, down 1.8% year-on-year. Meanwhile, steel billet exports increased significantly by 21.3%.
3. **Stable Fixed Asset Investment**: Total fixed asset investment in the national steel industry reached 303.5 billion yuan between January and June. Investments in ferrous metal mining and smelting showed modest growth, though both were lower compared to the same period last year.
4. **Declining Inventories**: 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. However, inventory levels still rose by 4.69 million tons compared to the start of the year.
5. **Falling Steel Prices**: Steel prices have been on a downward trend since February. As of June, the comprehensive steel price index had dropped for 18 consecutive weeks, reaching 98.52 points—a 6.4% decline from the beginning of the year and 14.7% from the same period last year, marking the lowest level since November 2009.
6. **Economic Performance Deteriorates**: Although sales revenue for large and medium-sized steel companies increased slightly, profits declined month by month. Out of 86 key companies, 35 reported losses, with an overall loss rate of 40.7%.
**Future Outlook**
- **High Crude Steel Output**: Despite a slight drop in daily crude steel output in June, it remained at a high level. Given the declining profit margins, the industry may face losses in the second half of the year, leading to a potential decrease in production.
- **Market Pressure Remains**: While demand for steel picked up in the second quarter, macroeconomic policies are expected to remain stable, limiting significant growth in domestic demand.
- **Export Challenges Increase**: Anti-dumping investigations from several countries, including the U.S., Canada, and Australia, are making steel exports more difficult. Annual steel exports are expected to rise by about 10%, reaching 61.5 million tons.
- **Low Profitability Likely**: Steel companies continue to face cost pressures, especially from rising iron ore prices. Efforts to cut costs will be critical, and low profitability is expected throughout the year.
- **Rising Financial Risks**: Debt levels for large steel companies have increased, with total liabilities surpassing 3 trillion yuan. As financial institutions tighten their oversight, the risk of default and operational challenges is growing.
Overall, the Chinese steel industry faces a challenging outlook in the second half of the year due to slowing economic growth and overcapacity. Environmental concerns are also gaining attention, pushing the sector toward sustainable development. To navigate these challenges, the industry must focus on structural optimization, improved efficiency, and a balance between production scale, product variety, energy conservation, and environmental protection.
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