As Liberty Times Net reported on July 21, the storm of unfinished buildings in China has caused the capital chain of real estate developers to break, leading to an economic crisis that’s badly impacting the financial system and the steel industry.
According to incomplete data, six steel companies, including Longyan Shixing Iron and Steel in Fujian province, have gone bankrupt since the beginning of this year. Moreover, 28 steel firms have suspended their operations.
China has seen an obvious oversupply in domestic crude steel while production has dropped. The latest statistics from China’s National Bureau of Statistics indicate that crude steel production in 10 provinces and cities fell more than 10% in the first half of 2022.
For instance, Chongqing and Guizhou saw a drop of over 20%. There were similar figures for Shanghai and Shandong, at just below 20%. Sichuan, Tianjin, and Zhejiang did marginally better, with falls ranging from 12% to 16%.
Official statistics show that in June 2022 alone, China’s steel output was over 20 million tons, down 19.3% from a year earlier. Moreover, the cumulative output in the first half reached nearly 118 million tons, a drop of 14.1% compared with the same period last year.
Regarding operating profit rate, 247 steel companies have suffered a plunge, from nearly 84% in March to 15.15% in late June this year.
At present, both the supply and demand sides of steel are weakening. As a result, the market has entered a weak supply and demand pattern, with high steel inventories.
According to S&P Global, China’s property development is predicted to remain on a downward trend in 2022. As a result, the country’s steelmaking industry—the biggest in the world—might experience a gradual decrease in its capacity from late 2022 or 2023.