China’s steel industry slowdown is deepening, with BHP Group Ltd., the world’s largest miner, and China Baowu Group Ltd., the top iron ore buyer, raising concerns as demand wanes after decades of growth, Bloomberg reports.
Despite relatively healthy profits reported by BHP and Baowu’s listed unit, their cautious outlook on steel demand heightens global concerns about an escalating slump. Baoshan Iron & Steel Ltd. cited sluggish consumption, while BHP CEO Mike Henry pointed to challenges in China’s real estate sector and an uneven recovery.
China, a dominant force in the global steel market, has seen demand decline by over 10pct since 2020, signaling the end of a long boom that fueled profits for major iron ore shippers like BHP. These concerns have intensified with the ongoing property crisis, driving benchmark steel prices to multiyear lows and intensifying competition among mills domestically and internationally.
Baoshan Iron & Steel noted that the industry faces strong supply, weak demand, high costs, and low prices, predicting continued oversupply and pressure on steel companies in the second half of the year.
BHP, which produces 260 mln tons of iron ore annually, ships most of it to China, where Baowu is its largest customer. The crisis has already significantly impacted iron ore prices, with futures plummeting by more than a quarter this year.
BHP believes China’s steel production has plateaued above 1 bln tons and expects this trend to persist through the mid-2020s. In response to the challenging environment, CEO Henry is steering the company toward copper, anticipating a market deficit for the energy-transition metal later this decade.
While major iron ore and steel producers are better positioned to weather the downturn due to their scale and low costs, higher-cost miners face pressure to halt output when prices drop below USD 100 per ton, a level recently breached. The worst effects of China’s steel slump are expected to hit smaller, private mills hardest.
