According to a report from Bloomberg, Shanghai trader Yu Yongzhang’s steel sales have plummeted by more than three-quarters in just a few years, leaving him feeling “hopeless.” In Chile, Hector Medina at the Cap SA steel plant is facing unemployment after working there for nearly 50 years. All of this is attributed to the overcapacity caused by the Chinese Communist Party’s policies.
When it comes to steel, China’s annual production has exceeded 1 billion tons, accounting for more than half of the global total.
Currently, China’s ongoing real estate crisis has led to a contraction in the domestic construction industry, resulting in an oversupply of steel. For other regions around the world, China’s surplus products bring concerns of dumping, driving down prices and forcing factories to close, leading to unemployment.
Earlier this year, US President Biden called for higher tariffs on Chinese steel and aluminum during a speech at a United Steelworkers union event. His economic advisor Lael Brainard pointed out that Beijing’s policy-induced overcapacity poses a serious threat to the future of the US steel and aluminum industries. The US government has begun taking measures to curb the import of Chinese steel through third countries like Mexico.
In China, weak demand and overcapacity have led to a rapid increase in loss-making companies, with over 2,300 companies reporting losses in June, a third more than at the end of last year.
“With prices plummeting, profits are shrinking. I’ve hardly made any money this year,” said Yu Yongzhang, who sells steel piles for building foundations at his trading company in Shanghai. “Demand in China is weak.”
This week, Hu Wangming, the owner of China Baowu Steel Group, referred to the steel industry in China facing a “severe winter.” On August 15, Zhang Rui, the general manager of Shanxi Jianbang Group, stated on his WeChat channel that the steel industry needs to cut staff by over 30% to overcome the current predicament.
“China’s steel demand has already peaked, and we should expect a steady decline ahead,” remarked Wu Zhang, founder of Shanghai Steel Home E-commerce Consulting Company, who has been in the steel industry for 40 years.
Due to the sharp decline in domestic steel prices in China, exports have become more lucrative. Currently, the export price of hot-rolled coils from China is at its lowest since 2020.
In the first half of this year, China’s exports equaled the entire production value of North America and is expected to reach around 100 million tons this year.
When Germany’s Salzgitter AG announced its financial report for the first half of the year this week, it highlighted overcapacity and Chinese exports as reasons for its losses. Europe’s largest steel manufacturer, ArcelorMittal SA, also made similar criticisms.
Martin Theuringer, Managing Director of the German Steel Association, said, “The warnings from China (the CCP) show that our fears are becoming reality.”
The Chilean government swiftly imposed new tariffs on imports from China this year to prevent the Cap SA steel plant from ceasing its blast furnace operations. After incurring massive losses, the company was forced to shut down.
At the age of 72, union leader Medina is facing the issue of severance pay for 2,500 employees. This has had a significant impact on the local economy, as the livelihoods of over 20,000 people in the area to some extent rely on the operation of the Cap SA steel plant.
“Shutting down is very disgraceful, and it is entirely due to extremely unfair competition from China (the CCP),” said Medina. “We will all lose our source of income.”
Cheap imports from China have surged in Latin America in recent years. In the late 20th century, China’s steel exports to the region were only 80,500 tons per year. However, by last year, this number had skyrocketed to nearly 10 million tons.
Daniel Rey, head of the Colombian steel industry group, stated, “This problem is becoming increasingly severe.” They are urging the government to implement protective policies.