(Adds quotes, details on new smelters)
BEIJING, July 31 Chinese steel demand is
expected to remain weak in the second half of 2013, the
country's steel association said on Wednesday, putting further
pressure on steel mills struggling with falling prices that have
pushed them into the red.
The group's 86 members made a combined loss of 669 million
yuan ($109 million) in June, marking the first aggregate loss
this year, the China Iron and Steel Association (CISA) said in
its second-quarter report.
For the first six months, 35 members were in the red, it
"Although the whole sector reported low profits in the first
half, demand growth for steel products is slower than output
growth," CISA vice-chairman Zhang Changfu told reporters at a
On Monday, the Ministry of Industry and Information
Technology said the debt-to-asset ratio of Chinese steel firms
reached 69.4 percent in the first five months of this year, up
1.4 percentage points compared with the same period of 2012.
Total debt chalked up by large and mid-sized steel mills
between January and May reached 3 trillion yuan, up 6.5 percent
from year ago, the report said.
It also said that there was unlikely to be any recovery in
demand in the second half of this year as China's economy slows.
Overcapacity has long been identified as a major challenge
facing the sector, with years of rampant and unregulated growth
creating a surplus of around 300 million tonnes. However, steel
firms have continued to build new facilities this year.
Citing statistics from consultancy Mysteel, the industry
ministry said in its sector report that as many as 31 new
smelters either went into operation or began construction in the
first quarter of 2013 alone, involving a total crude steel
capacity of 38 million tonnes.
Chinese steel firms were not expected to cut output to
reasonable levels because they were still able to maintain small
profit margins. Fear of losing market share and worries about
banks cutting back credit would also keep production at high
($1 = 6.1317 Chinese yuan)
(Reporting by David Stanway; Editing by Richard Pullin)