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Industry dynamics

Demand weakness will make China's iron and steel enterprise's profit under pressure
  • 2017-04-04

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Moody's investors service said on Thursday that China's iron and steel enterprise profit improved significantly in 2016. But It may be weaker in 2017.  The main reason is continuing excess capacity, steel inventories gtowth at the beginning of 2017 while domestic demand slowed down modestly.

"These factors will inhibit the high steel prices in the past 4 years together, iron and steel enterprises' profits is also affected by the high raw materials price and decreased export at the same time."Zou Jiming moody's senior vice President/analyst said, "real estate investment is the biggest driver of steel demand in China. Real estate investment could be slow this year with government tight policy, then domestic steel consumption will decline."

"Because of the low-powered car tax incentives decline, car sales and production will be slow. But the govemment promotion of infrastructure investment will remain active, which helps to reduce the pressure."Zou Jiming added.

Moody's latest report predicts the China's steel industry situation this year, China's steel exports decline in single digits high-end around 3.4% decline in 2016. The exports decline will be more due to overseas trade barriers rise/domestic and foreign market ‘s impact especial for stainless steel industry.

Moreover, the Chinese government plans to cut domestic steel production capacity of 50 million tons in 2017.If they achieve this goal, it will ease downward pressure on steel prices and profits.However, some obstacles may lead it slow such as iron and steel industry improvement profitability and the impact of capacity closures on local economy and employment.

Chinese government's efforts is to improve efficiency and profitability in state-owned enterprises and large-scale iron and steel enterprises. It means to encourage to merge and acquire smaller rivals. The weaker enterprises may face strict lending standards. It leads to quit .Integration will improve the market share of large enterprises.

As the one leader of stainless steel industry, Cong Shine stainless steel tube and stainless steel sheet are always better than others suppliers . Any questions about stainless steel production , pls feel free to ask us.

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