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Steel ...plummeting prices.

Steel as cheap as cabbage in China

HONG KONG, October 20, 2014

Steel is now almost as cheap by weight as cabbage in China, reports said, as overcapacity is prompting Chinese steel enterprises to cut their prices in order to boost exports.

Domestic steel prices in China have fallen for 12 straight weeks now, with the Steel Composite Price Index down more than 13 per cent compared to December last year, even as the nation’s construction activity and real-estate market are cooling significantly.

The average price for the range of steel products on offer has fallen to 3,212 yuan ($520) per metric ton for the first half of the year, down 28 per cent from the average price in 2012, China Iron & Steel Association (CISA) data showed.

Pressures arising from expanding inventories and sluggish domestic demand have resulted in cut-throat competition among China’s steel mills, resulting in meager profits. The margin for China’s large and medium-sized steel companies was 0.54 per cent for the first seven months of 2014, CISA was quoted as saying by MarketWatch.

The problems are affecting the global markets too, as the Chinese firms cut prices to try to boost exports so as to make up for the weak domestic sales.

China’s net exports of steel product reached a record 7.2 million metric tons in September, up 4.5 per cent from the last all-time high, posted in May, according to the Wall Street Journal.

The average price for exported steel products was only $793 per metric ton in the first half of this year, down 9 per cent from a year ago, with companies breaking even at that level, getting benefit only from associated tax breaks for exporters, CISA said.

Meanwhile, Europe have also fallen more than 10 per cent so far this year, while the price of iron ore — the key component for smelting steel — touched a five-year low in September.




Tags: China | Steel | production |

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