CRU: Chinese Steel: On the Brink of Structural Profitability

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22 Sep, 2017, 08:00 GMT

LONDON, September 22, 2017 /PRNewswire/ --

This Special Feature is the first in a series of five that look at the implications for the global steel market of China's capacity reduction programme. Chinese steel producers' margins have grown fat this year. We think this is partly due to short-term factors, and prices will fall back. However, this is also likely evidence of improving underlying industry health. Moreover, aside from the usual seasonal variation, we expect this to continue and support improved Chinese industry profitability.

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90% utilisation signals return of industry health  

  • EAF and BOF capacity eliminations are progressing broadly in line with government targets, while all IF capacity is now closed. Total carbon crude steelmaking capacity therefore fell by almost 240 Mt in the last 3 years, to around 1,020 Mt this year.
  • In the absence of substantial increases in domestic demand and production, this has been the principal driver of rising capacity utilisation rates, supporting prices and margins this year.
  • We expect further eliminations of BOF and EAF capacity over the next three years, helping capacity utilisation approach 90% in 2020 - a level consistent with sustained industry health.

Read the full story: http://bit.ly/Chinese-Steel-Profitability

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