The steel industry in China has faced its first widespread loss in years, triggering a new wave of restructuring. According to an authoritative source, large and medium-sized steel enterprises under the China Iron and Steel Association (CISA) reported a total profit of 2.267 billion yuan in the first half of the year, representing a 2.69% increase compared to the same period last year. However, this growth was overshadowed by a sharp downturn in June, when the sector recorded a loss of 699 million yuan. The profit margin for these companies dropped from 0.13% in the first half of the year to -0.23% in June, signaling serious financial strain.
The situation is even more alarming when looking at the broader picture. For five consecutive months, the industry managed only “micro-profits,†but now it’s flashing a “red light.†Internal CISA data shows that in June, large and medium-sized steel companies lost 36.5%, with 31 of them reporting losses. From January to June, the cumulative loss among these firms reached 40.07%. Meanwhile, some non-statistical steel mills are still struggling in deep financial trouble.
According to mid-year reports from 17 listed steel companies, three have issued medium-term warnings, one reported its first loss, and six have experienced consecutive losses. These companies account for nearly 60% of those forecasting declines. Additionally, four companies expect performance improvements, while three have turned from profits to losses.
Industry experts suggest that the challenges facing the steel sector are unlikely to ease soon. A key factor is the high production levels amid weak market demand. With oversupply, raw material costs—such as iron ore and coke—have risen, while steel prices remain low or even below production costs. This combination of high inventory and sluggish sales has placed many steel mills in a difficult position.
Recent data from the National Bureau of Statistics reveals that crude steel output rose by 7.4% year-on-year in the first half of the year, reaching 389.87 million tons, while steel output climbed to 516.96 million tons, up 10.2% compared to the same period last year. Despite this, steel prices continued to decline. In June, the domestic steel price index averaged 99.15, down 4.45 points from the previous month and 16.72 points lower than the same period last year.
A senior executive from a major Hebei-based steel plant noted that tightening credit policies and industrial adjustments have hit high-energy-consuming sectors particularly hard. Steel mills are now under pressure to invest in cleaner technologies and face growing debt burdens. Many have debt-to-asset ratios exceeding 90%, leading to tight capital chains and operational difficulties.
Xu Xiangchun, director of the Information Department at Steel Network, warned that the second half of the year will bring even greater challenges. Although the economy is stabilizing, real estate and infrastructure demand is not expected to rebound significantly, meaning steel demand will remain weak. Moreover, overcapacity means that any recovery in steel prices will quickly lead to increased production, worsening the oversupply problem and causing raw material prices to fluctuate more dramatically.
“The prolonged downturn in the steel industry will inevitably lead to a reshuffle,†Xu said. Since last year, the “winter†has already affected traders in the middle of the supply chain, with many going bankrupt. Now, the crisis is spreading to steel mills, and some smaller producers are already collapsing due to cash flow issues. This is a warning signal that should not be ignored. Banks are likely to become more cautious in the coming period, and if the industry remains in decline, some steel companies may eventually go bankrupt due to broken capital chains. Mergers and acquisitions will also pick up, leading to a new round of industry consolidation.
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