China steel demand slumping at ‘unprecedented speed’, says industry body

If anyone doubted the magnitude of the crisis facing the world’s largest steel industry, listening to Zhu Jimin would put them right, fast.

Demand is collapsing along with prices, banks are tightening lending and losses are stacking up, the deputy head of the China Iron & Steel Association said on Wednesday.

“Production cuts are slower than the contraction in demand, therefore oversupply is worsening,” Zhu said at a quarterly briefing in Beijing by the main producers’ group. “Although China has cut interest rates many times recently, steel mills said their funding costs have actually gone up.”

China’s mills – which produce about half of worldwide output – are battling against oversupply and sinking prices as local consumption shrinks for the first time in a generation amid a property-led slowdown. The fallout from the steelmakers’ struggles is hurting iron ore prices and boosting trade tensions as mills seek to sell their surplus overseas. Shanghai Baosteel forecast last week that China’s steel production might eventually shrink by 20 per cent, matching the experience seen in the United States and elsewhere.

“China’s steel demand evaporated at unprecedented speed as the nation’s economic growth slowed,” Zhu said. “As demand quickly contracted, steel mills are lowering prices in competition to get contracts.”