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Steel industry downturn to continue in H2

By Du Juan  (China Daily)

13:15, July 11, 2012

China's steel industry, already experiencing a big drop in profits since the turn of the year, will continue to face a downturn in the second half, as demand remains gloomy and an overcapacity of steel continues, according to a leading industry expert.

Zhang Lin, senior researcher at the Lange Steel Information Research Center, said despite government efforts at accelerating the approval of a series of infrastructure construction projects in May, the steel industry will remain firmly in the doldrums for the foreseeable future.

She explained that demand will remain depressed and steel prices will stay low for a while - maybe even drop slightly in coming months - because of the long investment cycle of the planned projects.

China's manufacturing and real estate industries remain weak, leading to lower steel consumption.

The country produced 296.26 million metric tons of crude steel during the first five months of the year, 6.4 million tons more than in the same period last year and 2.2 percent growth year-on-year, according to the China Iron and Steel Association.

The association predicted the average daily output of crude steel in June would be around 1.97 million tons, down 1.4 percent compared with the previous month but still at a high level.

Zhang said the contradiction between increasing steel output and shrinking demand will lead to high steel inventories, pushing down prices.

The nation's total steel products inventory reached 15.63 million tons on June 29, 69,600 tons more than the week before, according to market monitoring by the center. The inventories have now been increasing for three successive weeks.

The weak market for Chinese steel has depressed the demand for fuel, particularly coal and iron ore, leading to record high port inventories and falling prices of both, said Chen Kexin, an analyst at the center.

According to official figures, coal stocks at Qinhuangdao, the largest coal trading port in China, swelled to 9.46 million tons on June 18, the highest level since the outbreak of the 2008 financial crisis.

China's iron ore inventories at ports increased 2.9 percent to 98.15 million tons last week from 95.35 million tons in April, according to Shanghai Steelhome Information.

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