BEIJING, May 13 (Xinhua) -- Steel industry in China is now in trouble and faced with problems such as impeded exports, soft demand, high inventories and falling prices, affected by the COVID-19 outbreak.
-- Soft demand and falling exports
He Wenbo, Party chief of the China Iron and Steel Association (CISA), noted that the epidemic had a greater impact on the demand for steel. Judging from the indicators reflecting the performance of the domestic steel industry in the first quarter released by the National Bureau of Statistics (NBS), the decline in steel demand was more obvious.
Specifically, in the first quarter, the steel demand from many downstream sectors declined significantly. For example, the new construction area in the real estate industry fell by 27.2 percent year-on-year, and the investment in infrastructure construction (excluding electricity, heat, gas and water production and supply) fell by 19.7 percent year-on-year. The domestic shipbuilding industry completed ships with a tonnage of around 7 million deadweight, down 27.3 percent year-on-year.
In addition to the soft demand for steel in the domestic market, the country's steel exports are also under pressure.
He pointed out that due to the epidemic, the overseas demand for steel has dropped sharply. Major steel export enterprises saw a sharp month-on-month decline in the number of new orders from the overseas users in March and April. Since the end of March, it has been common for overseas orders to postpone delivery, and there have also been some cases where orders are required to be cut or even cancelled.
He said that if both direct and indirect exports of steel fell by a quarter, the steel demand this year would fall by 3.8 percent. If the international epidemic situation worsens, the decline in steel demand will be greater; if the expansion in domestic demand offsets the impact of falling exports, the decline in steel demand will be narrowed.
-- Sluggish prices and profits
Affected by the falling demand, the steel prices in the domestic market have fallen significantly.
In the first quarter, the China Steel Price Index (CSPI) monitored by the CISA averaged 101.69 points, a year-on-year decrease of 5.7 percent. By month, steel prices continued to decline slightly. The CSPI was 105.48 points at the end of January, 100.39 points at the end of February, and 99.21 points at the end of March.
"Falling demand and stable supply have led to a glut in the steel market, and further capped the prices," said He, adding that the downward trend in steel prices has not slowed down. As of the second week of April, the CSPI fell to 96.86 points, the lowest since May 2017.
In terms of inventory, generally, the steel industry has still witnessed high inventories. In late April, the social stocks of five major varieties of steel in 20 cities were 16.24 million tons, a decrease from the previous ten days, but still increased by 9.43 million tons from the beginning of the year.
Luo Tiejun, vice chairman of the CISA, said that according to the current production plans of the steel plants and the overseas epidemic development, high inventories may become the normal in the steel market this year.
It is worth noting that due to the price drop, the profits of steel companies fell. In the first quarter, the key steel mill members monitored by the CISA saw their sales revenue stand at 891.6 billion yuan, down 5.6 percent year-on-year; with their total profits at 18.3 billion yuan, down 50.8 percent year-on-year. Their profit margin was 2.05 percent, down 1.89 percentage points year-on-year. (Edited by Hu Pingchao with Xinhua Silk Road, hupingchao@xinhua.org)
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