Manufacturing News

Chinese Steel Profits Drop to One yuan per 1,000 Kilograms

China's steel prices dropped further in early June and the gross profit of 1,000 kilograms of steel has slumped to one yuan(0.15 US dollar), Guangzhou-based Information Times reported on Wednesday.

Industry data shows that, up to June 6, the market price of steel had declined over 30 percent compared with that in late April; however, the cost of producing steel has only reduced 10 percent in the same period, which made the gross profit of 1,000 kilograms decline dramatically, from its highest of 812 yuan (123.18 US dollars) in April to just one yuan at present.

According to Information Times, an increasing number of steel enterprises have been reducing their steel output since the end of May because of the slump of profits.

China, the world's largest steel producer and consumer, has been resolute in its commitment to reduce overcapacity in the sector.

Experts say the overcapacity is a by-product of the stimulus program implemented during the global financial crisis, during which China contributed about 50 percent to world economic growth.

China has shut down steel factories with a total capacity of over 90 million tonnes over the past five years and plans to reduce this by an additional 100 million to 150 million tonnes by 2020.

Resource-rich provinces including Hebei, Liaoning, Shanxi and Shaanxi have rolled out their own measures to cut steel output.

Qiu Yuecheng, an industry analyst from Xiben New Line Stock, a metal service center based in Shanghai, said with more detailed policies on cutting steel overcapacity being introduced and implemented, it is possible for China to reach the goal of cutting overcapacity in the steel sector earlier, which will turn out to be good news for the country's steel industry.

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