The profits of the steel factories in China restore with the surplus production of Beijing

The profitability of the Chinese steel companies has begun to recover over the past month, and this improvement is likely to accelerate in the second half of the year if the government fulfills its promises to address the problem of surplus production. According to the National Statistical Office on Sunday, the cumulative gains of iron melted minerals jumped about 14 times on an annual basis, although the equation began from a very small base in the same period last year. The profit margins enjoyed some support during June, with the factories lowering production, and the cost of raw materials fell compared to the prices of the final products. In recent years, the steel sector has sustained a serious crisis as a result of the collapse of the property market in China, which is traditionally the most important source of steel demand. This has made the sector an important target for Beijing’s campaign against “excessive competitiveness”, which has accelerated in recent weeks. Although factories have previously favored the real restrictions on production capacity, there is an increasing urgency by policymakers to reduce excessive competition in the economy. See also: China: Strict measures to counteract surplus steel and fuel production in China. Possible ways to combat surplus production are still being studied, but it seems that the factories expected these measures by significantly reducing production in June, resulting in the total production of the first half of the year to the lowest level since 2020, leaving the door open to ask if the government should impose more discounts. On the other hand, the request saw an improvement. The consumption rose 4.3% during the first half of the year, led by the car and machinery sectors, according to “Bloomberg Intelligence”. Although the construction sector is still fragile, exports have continued their strong growth, according to the agency winds in the trade. Expectations look more optimistic, especially with the expected increase in demand due to the large dam project in Tibet. UBS AG said in the memorandum last week that more than 60% of steel producers are currently gaining profits, compared to only 30% in July 2024.