The profits of China’s steel industry fell by 20% y/y in May

Negative indicators of Chinese steelmakers prompt them to reduce production volumes, which will reduce export opportunities and pressure on world markets

In May 2023, the operating profits of the Chinese steel industry decreased by 20% compared to May 2022 – to 668.1 billion yuan ($95.2 billion). Compared to April, the indicator decreased by 0.3%. Kallanish reports about it with the reference to data from the National Bureau of Statistics of China (NBS).

The fall in profits in the industry is explained by the slowdown in demand for steel. At the same time, prices for basic steel products decreased by 4.4-4.7% in May.

Meanwhile, the industry posted a loss of 2.49 billion yuan last month, compared with a profit of 5.23 billion yuan in April and 14.24 billion yuan in May 2022.

For January-May 2023, China’s steel industry recorded a decrease in operating income by 8.8% compared to the same period in 2022 – to 3.37 trillion yuan. The industry’s losses since the beginning of the year amounted to 2.1 billion yuan, while in January-May last year, steelmakers received 80.2 billion yuan in income. Thus, the steel sector became one of the two main industrial sectors of the country that suffered losses since the beginning of the year.

«The losses of Chinese producers encourage them to reduce production volumes. This will reduce export opportunities and pressure on world markets. Gradually, imports from Asian countries will become more expensive. This is evidence that prices have bottomed out. In the second half of the year, we can expect the recovery of prices for steel products. But the reduction in production will not be significant, which will prevent the fall in prices of raw materials,» comments the chief analyst of GMK Center Andriy Tarasenko.

In May, the mining industry increased revenues by 5.7% m/m – up to 36.25 billion yuan. For 5 months of 2023, the indicator decreased by 9% y/y – to 184.53 billion yuan. The industry’s profit for May decreased by 28.6% y/y – to 4.37 billion yuan, and for January-May – by 41.9% y/y, to 18.45 billion yuan.

As GMK Center reported earlier, for January-May 2022, China increased steel production by 1.6% compared to the same period in 2022 – up to 445 million tons. In May, 90.12 million tons of steel were produced, which is 7.3% less compared to May 2022, and 2.7% less m/m.

Production of steel products increased by 3.2% y/y in 5 months – up to 557 million tons in May, the output of steel products decreased by 1.3% y/y and 1.2% m/m – to 118.47 million tons.