China steel output drops for the first time since 1991. China is the largest producer of steel. Mills in China, which make half of the total global steel supply, produced less last year. As local demand dropped considerably, prices sank and producers struggled with overcapacity. As the iron ore price sinks into the $30s, thousands of Chinese steel mills are engaging in a desperate battle just to stay alive.
Crude steel production shrank 2.3% to 803.83 million metric tonne and alone in December, steel production fell 5.2% to 64.37 million tonnes, compared to 2015. China’s entire economy slowed in December, capping the weakest quarter of growth since the 2009 global recession. Demand for steel is collapsing along with prices, banks are tightening lending and losses are stacking up.
In China, housing sector and many other consumers of steel, including the automobile, shipbuilding and machinery sectors are feeling the heat now. Orders at Chinese shipyards have fallen 77% in the first quarter from a year ago. China’s economy is trying to make the difficult transition from one based on investment to one based on domestic consumption. Steel has driven China’s industrial revolution but the economy is slowing and China’s appetite for steel has waned.
Indian Steel Industry
India, the world’s third-biggest steel market after China and the US, is the only one among the top six where demand is forecast to rise both this year and the next. India’s steel industry, which is facing a crisis due to cheap imports and subdued prices, has sought a government support package. Steel shipments to India grows at a slower pace due to the increased import tax on some products by the central government, fearing an influx of cheaper goods from China. India is readying to impose more curbs on steel imports, including introducing a safeguard duty, after a 20 percent import tax failed to contain losses for producers such as Steel Authority of India.
Like oil price, due to overproduction and less consumption, steel price is also falling day by day. This trend seems to be continued for the coming months too, unless the consumption increases.