CONF: CISA calls for fair division of ferrous industry profits
"With domestic steel consumption starting to slow down after reaching a peak, China's steel industry is now facing unprecedented challenges," Tang told attendees at Mysteel's 2023 14th Ferrous Commodity Summit in South China's Xiamen city on November 16.
Tang Zujun, vice president of CISA
China's infrastructure construction and real estate sectors – the country's most important steel consumers – have plateaued in recent few years, so domestic steel demand is likely to decline in the long run, according to Tang.
Meanwhile, China's oversupply of steel will remain the industry's major problem, Tang warned. "China has committed itself to scaling back total steel production capacity, but in the past three years, only slow progress has been made," he said. "In fact, the scheme of 'swapping' steelmakers' old facilities for new (of equal or lower capacity) sometimes leads to the growth of the total capacity," he added.
The mismatch between steel supply and demand has resulted in the continual fall of steel prices, while the prices of steelmaking raw materials are staying persistently high, resulting in more steelmakers losing money, Tang noted.
"Prices of iron ore, coke, and coking coal constitute around 85% of Chinese steelmakers' total production cost," he explained. "Producers of these raw materials are enjoying healthy profits and are relentlessly squeezing the margins of steel mills," he said.
CISA's statistics show that some 40% of the Association's more-than-80 steelmaker members suffered losses on steel sales during January-October this year, according to Tang.
"The average profit rate of iron ore producers is around 30%, while that of steel mills is only around 1%," Tang argued. "The significant imbalance of profits will hinder the sustainability of the ferrous industry in the long run," he cautioned.
"The industry can hardly maintain a healthy development unless the profit distribution becomes reasonable among all the links of the industry chain," Tang stressed. "Raw material producers and steelmakers need to extend their win-win cooperation to ensure the stability of the whole industry," he said.
Written by Anthea Shi, shihui@mysteel.com
Edited by Russ McCulloch, russ.mcculloch@mysteel.com
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