CISA: Over 50% of Chinese steel mills reported loss during 2015

BEIJING (Scrap Monster): The latest press release by the China Iron and Steel Association (CISA) indicates that more than 50% of the country’s steel mills reported losses during 2015. The companies posted combined shortfall of 64.53 billion yuan during the year as compared with the combined profit of 22.59 billion yuan during 2014. According to the press release, the Association member companies reported total sales of 2.89 trillion yuan during entire year 2015, significantly down by 19.05% over the previous year.

For the first time in past 35 years, the country reported annual drop in raw steel output. The country’s raw steel production totaled 803.82 million tons, 2.33% lower when compared with 2014. The reduced output is mainly of the back of weakening domestic demand, the press release states. The end-users of steel products witnessed slowdown in growth and huge drop in demand during the year.

The sharp drop in steel demand, rising costs of production and tighter credit norms have led to cut in output by many Chinese smelters during recent times. Estimates indicate that 67.25 million tons of steel production capacity stopped operations during 2015. More than 30 companies announced permanent closure of production facilities. The smelters, especially in the Northern provinces, are likely to announce even sharper production cuts during the next few months. The recent statement issued by Chinese authorities estimate cut in crude steel production capacity by 100 to 150 million tons. This will lead to loss of nearly 500,000 jobs.

Industry data shows that there are more than 80 medium-sized companies with aggregate debt in excess of at least 3 trillion yuan. The handling of huge debt on books and workforce reemployment are the key issues before the country’s steel sector operations, analysts noted.