SHANGHAI (Reuters) - Large Chinese steelmakers’ losses in core business more than doubled during the first five months from a year earlier as tumbling steel prices plunged producers into red, a top official of the China Iron & Steel Association (CISA) said on Thursday.
CISA members, comprising of 101 big mills, posted a loss of 16.48 billion yuan ($2.65 billion) in steelmaking business for January-May, which was 10.36 billion yuan more from the same period of last year, according Zhang Guangning, CISA’s chairman.
“It’s obvious that China’s apparent crude steel consumption has reached the peak, and the large growth of demand has became a history,” Zhang said in a speech that was published on the CISA website.
Chinese steel prices are at their lowest in more than 20 years as the stuttering economy is hitting demand for a range of commodities including iron ore, steel and copper, threatening the survival of small steel mills.
The apparent consumption of crude steel in the world’s top producer dropped 5.1 percent for the first five months from a year before, higher than 3.3 percent in 2014, while total output fell only 1.6 percent on year, the first decline in nearly 20 years.
“Some enterprises are short of capital and having difficulty in maintaining operations. A few would find it hard to survive and are facing the exit,” Zhang added.
The bloated steel sector is also struggling with environmental compliance costs while the recent plunge in their share prices have also further tightened their cash flow.
The most traded rebar futures on the Shanghai Futures Exchange lost 28 percent so far this year, the same as the decline for the whole of 2014.
Reporting by Ruby Lian and David Stanway; Editing by Gopakumar Warrier