Experts urge action to boost steel industry

More measures are expected to be put in place to battle China's sluggish steel and iron market as major producers experience a slump in profits, industry officials and experts said.

"Steel and iron producers should step up efforts in expanding markets, optimizing business structures, and increasing the added value of their products to achieve more profits," said Qu Xiuli, deputy head of the China Iron and Steel Association (CISA), a national group consisting of steel companies, institutions, and organizations.

CISA data showed their member companies have seen a 32 percent drop in profits, which totaled 146.6 billion yuan ($20.75 billion), for the first nine months of this year.

Wang Guoqing, director of Lange Steel Research Center, attributed the weakness in profits to rising costs and falling steel product prices.

"On one hand, the industry is facing increasingly expensive raw materials. On the other hand, the industry is turning into a buyers' market as production exceeded demand," Wang said.

The price of iron ore concentrates, a main raw material for steel and iron products, has risen 21.5 percent year-on-year, the CISA data showed. Scrap steel, another key raw material, has seen its price climb 8.8 percent compared with the same period last year.

The price of imported iron ore has surged 31.7 percent year-on-year.

Qu explained in a news conference on Tuesday that the surging price of raw materials was mainly due to a shortfall in the global iron market, as a mining dam disaster in Brazil and a cyclone in Australia caused supply disruptions.

"In addition, the past nine months have seen the rising cost of logistics and higher spending on environmental protection, which all led to cost increases for our member steel and iron producers,"Qu of CISA said. "In general, production costs have increased about eight to 10 percent for our member companies."

Aside from rising cost, the iron and steel industry has also seen product prices weaken for the first nine months of the year.

The China Steel Price Index dropped 6.2 percent year-on-year to an average of 108.58 points for the first three quarters of 2019. The CSPI was created by CISA in order to monitor changes in the product prices of steel.

Wang explained the drop in product price was because steel and iron supply has exceeded demand, resulting in a glut.

Data from CISA showed that crude steel production hit 748 million metric tons for the first three quarters of the year, up 8.4 percent year-on-year. Crude iron production was 612 million tons, higher by 6.3 percent year-on-year. Steel products output was 909 million tons, an increase of 10.6 percent compared with the same period of last year.

"Despite rising production, both domestic and overseas demand for steel products have declined,"Wang said.

China's export of steel products dropped 5 percent to 50.31 million tons for the first nine months of the year, according to CISA data.

"International trade uncertainties have posed great challenges to exports by steel and iron producers," Qu explained.

"China's steel and iron sector has been experiencing a sluggish market this year. Producers should step up efforts to reduce costs and seek new revenues," Wang of the Lange Steel Research Center said.