Major China steelmaker sees limited relief for troubled industry

The challenges that hit China’s steel industry in the first half are likely to persist for the rest of the year, says one of the country’s top producers of the metal.

Shrinking demand, supply shocks and virus-related impacts have added to pressures on the sector, Angang Steel Co said in an earnings release last Friday.

The steel giant, which has suffered from China’s property-market crisis, reported net

income had contracted nearly 70% in the first half.

The warning comes as rising inventories and falling margins point toward worsening prospects for the steel industry.

Demand is likely to be the major headwind for mills, with economists becoming more bearish on China and downgrading their 2022 growth forecasts.

State-directed measures to stabilise the economy will likely help consumption to recover gradually in the second half, but the future of the industry is still subject to considerable uncertainties, Angang said.

The panic over a potential global recession has led to a steep drop in steel prices since June and caused company losses across the sector, it said.

Angang aims to respond to the softer market by cutting costs, including procurement, and strengthening cash management to prevent liquidity risks, it said.

The risk of repeated virus-related lockdowns means there could be more delays to construction projects.

China is continuing to adhere to a strict zero-covid policy, with another city near Beijing facing a partial lockdown following 25 reported local coronavirus cases last Saturday.

Shijiazhuang, the capital of Hebei province bordering Beijing, confined residents of four major downtown districts to their homes for three days from Sunday afternoon, saying a mass testing exercise would be undertaken.