China’s steel industry is facing a crisis more severe than the downturns of 2008 and 2015, according to Hu Wangming, Chairman of China Baowu Steel Group, as reported by Bloomberg. Hu characterized the current conditions as a “severe winter”, predicting that the crisis will be “longer, colder, and more difficult to endure” than expected.
This grim outlook has led to further declines in the iron ore and steel markets. Iron ore prices have dropped to their lowest level since last year, while Shanghai rebar futures have fallen over 4pct, reaching their weakest point since 2017. The industry’s largest market is showing multiple warning signs, including a significant drop in domestic demand due to a property downturn and weaker factory activity.
Prices have plummeted to multiyear lows, and mills are facing losses. Baowu, which produces about 7pct of the world’s steel, underscores the global impact, with competitors in Asia, Europe, and North America grappling with increased Chinese exports. Historically, similar crises were addressed with substantial stimulus measures, but such relief appears unlikely in 2024 as President Xi Jinping prioritizes economic restructuring.
As production becomes increasingly unprofitable, iron ore inventories are swelling, and reinforcement bar prices have hit their lowest since 2017. Exports are expected to exceed 100 mln tons, the highest level since 2016.
