China’s Steel Manufacturers have changed last year’s drastic losses to make a profit for the first half year of 2016, due to the government’s pressure to consolidate and decrease capacity, which initiates the hopes of global industry recovery.
According to Ma Guoqiang, the president of China Iron and Steel Association, member companies of this association account for about 80% of total Chinese production capacity, a combined retained profits attained RMB 12.6bn ($1.9bn) for the first half year of 2016, year-on-year growth more than four times.
Mr. Ma, also the chairman of Wuhan Iron & Steel Group, at CISA’s annual meeting, said that many companies had “accurately predicted market trends” as well as sized the opportunity of capital on the upswings although the price fluctuation.
Over the past half year’s global steel prices recovery gave people a ray of hope about an industry struggling to recover after fall iron prices last year of almost 30%, in accordance with the Platts Word Steel Price index.
The largest steel producer all over the word, MarcelorMittal, said that it was “cautiously optimistic” about prospects for the remainder of 2016, even noted that structural overcapacity is still a serious headwind for the steel industry.
However, Sebastian Lewis, a Shanghai-based analyst at Platts, said that the jump profitability of Chinese steel producermight be a “one-off hit” of inventory de-stocking, which “releases cash and flatters profits”.
The Chinese government de-capacity was the key to the profits recovery, said Hu Yanping, an analyst at Umetal ( an industry information company in Beijing).