by Gary Hook, CEO Metals New Zealand
China steel chief says demand ‘evaporating at unprecedented speed’. If anyone were in any doubt about the magnitude of the crisis facing the world’s largest steel industry, listening to Zhu Jimin would put them right. Demand is collapsing along with prices, banks are tightening lending and losses are stacking up, the deputy head of the main steel mills’ group said in China on Wednesday.

“Production cuts are slower than the contraction in demand, therefore oversupply is worsening,” said Zhu at a briefing by the China Iron and Steel Association (CISA).

“Although China has cut interest rates many times recently, steel mills said their funding costs have actually gone up.”

China’s mills – which produce half of the world’s steel – are battling against oversupply and sinking prices as local consumption shrinks for the first time in a generation. The fallout from the industry’s struggles is boosting trade tensions as China’s mills seek to sell their surplus overseas.

“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.”

Medium and large-sized mills incurred losses of 28.1 billion yuan (A$6.2 billion) in the first nine months of this year, according to a statement from CISA. Steel demand in China shrank 8.7 percent in September on-year, it said. Crude steel output in the country fell 2.1 percent to 608.9 million tonnes in the first nine months of this year, while outbound shipments jumped 27 percent to 83.1 million tonnes, according to official figures. Chinese steel mills face some of their worst conditions ever and the vast majority are losing money, Citigroup Inc. said in September.

The outlook for mills in the country is the worst ever amid unprecedented losses, Macquarie Group Ltd. said in an Oct. 19 report, citing a survey by the bank.

Our Industry Response
Those competing with international price offers right now need to be aware of the desperate efforts by international suppliers to offload inventory in the search for cash, and respond accordingly. Globalisation of the steel industry is accelerating rapidly right now and here in NZ as the Government’s free trade agenda rolls on.

We must also be on the lookout for products that might not meet our Product Standards and therefore potentially our building codes. There is a clear obligation on the channel/reseller to assist in quality assuring product being offered to the market.

Responding to a lower priced environment in the medium term will call for more productivity; more capable processes with less complexity & waste and a more flexible working culture by employees.
– metalsnz@gmail.com