In an alarming trend for the Chinese steel industry, losses have further widened. Over the past year, the total profits of steel enterprises plunged by 50.3% year-on-year, with an average sales profit margin of just 0.71%.
On January 20th, during the seventh meeting of the sixth session of the China Iron and Steel Industry Association (referred to as “CISA”), CISA President Yao Lin announced that in 2024, based on preliminary statistics, key reporting enterprises achieved operating income of 6.02 trillion yuan, a decrease of 6.4% year-on-year. Operating costs totaled 5.71 trillion yuan, down 5.9% year-on-year, with a profit of 42.9 billion yuan, marking a 50.3% decrease year-on-year. The average sales profit margin stood at 0.71%, experiencing a 0.63 percentage point drop from the previous year.
In the preceding year, CISA’s statistical data showed that in 2023, profits of key member steel enterprises were 855 billion yuan, a decrease of 12.47% year-on-year, with an average sales profit margin of 1.32%, down by 0.17 percentage points.
Yao Lin remarked, “The steel market exhibits a clear trend of oversupply and weak demand, making business operations incredibly challenging.” He emphasized that 2024 was a crucial year for the deep adjustment of the steel industry, with downward pressure on the traditional steel industry increasing, volatile raw material prices, and the industry transitioning into a phase of “reducing quantity and optimizing existing capacity.”
Renowned mainland Chinese financial analyst Xu Zhen recently told [Publisher Name] that the steel industry’s two major clients, namely the real estate and automotive industries, both experiencing a downturn concurrently spells disaster for the steel sector.
American economist David Huang also shared insights, highlighting that for over two decades, the real estate sector has accounted for over 40% of steel consumption, so the contraction in the real estate industry undoubtedly is a key factor overwhelming the entire steel industry.
Huang further pointed out that the plight of China’s steel industry extends to deep-rooted economic issues, revolving around the interdependence between local finances and state-owned enterprises. Originating from the era of Mao Zedong’s large-scale steel production, China established numerous steel plants, often state-owned. In recent years, state enterprises have acquired private enterprises, leading to an increasing dominance of state-owned enterprises. Consequently, the industry is following a path of industrial coercion policies to preserve the steel industry, reflecting a complex bureaucratic organizational model.
Moreover, the Chinese steel industry faces structural challenges, with oversupply in the lower end and significant imports in the higher end, highlighting the issue of being “big but not strong”.