China’s steel industry is facing a significant crisis, leading to a surge in bankruptcies and accelerating much-needed consolidation, according to a report from Bloomberg Intelligence. Nearly 75% of the country’s steelmakers reported losses in the first half of the year, and many are at high risk of bankruptcy, as noted by senior analyst Michelle Leung. Companies like Xinjiang Ba Yi Iron & Steel Co., Gansu Jiu Steel Group, and Anyang Iron & Steel Group are particularly vulnerable and may become targets for acquisition.
This impending wave of consolidation aligns with Beijing’s goal of increasing market concentration in the steel sector. The government aims for the top five firms to control 40% of the market by 2025, while the top ten should account for 60%. These targets appear achievable, though China remains behind South Korea and Japan in industry consolidation, Leung added.
The ongoing property crisis and declining economic growth in China are reshaping the landscape of its vast steel industry. The head of China Baowu Steel Group Corp., the country’s largest steel producer, recently warned that the current crisis could be more severe than those experienced in 2008 and 2015. A downturn in domestic demand has forced mills to increase exports, triggering trade disputes with countries claiming that Chinese steel is being sold at below-market prices.
Despite these challenges, China’s steel exports are not expected to decrease until late 2026, as total production declines and more trading partners impose restrictions, according to Bloomberg Intelligence. Economists believe that a housing rescue package could pave the way for China to achieve around 5% economic growth, provided it is effectively implemented amidst a real estate crisis that could last another five years.
Additionally, Chinese banks may initiate a new round of mortgage rate cuts this year to support dwindling consumer demand, as reported by the Securities Daily.
In other news, Citigroup Inc.’s expansion plans in China have encountered obstacles due to regulatory issues, following a penalty imposed by U.S. regulators related to the bank’s data management and risk controls.
Related topics:
