Iron and steel sector gains strength

Employees perform smelting operations at a steel plant in Maanshan, Anhui province. [Photo by Zhang Mingwei/For China Daily]

China's iron and steel industry made a strong comeback in the first three quarters of 2018 as the market stabilized and companies' profits increased, said the industrial association on Wednesday.

Liu Zhenjiang, secretary-general of the China Iron and Steel Association, said the first three quarters of 2018 had seen a stable market that "has not been witnessed for years".

He said steadily growing GDP has provided stable demand for the steel sector. As GDP grew by 6.7 percent year-on-year in the first nine months, reaching 65.1 trillion yuan ($9.34 trillion), the output of iron and steel products has picked up momentum accordingly.

"The production of pig iron, crude steel and steel grew by 1.19 percent, 6.07 percent and 7.21 percent year-on-year, respectively," he said.

The member companies of the association were reported to have achieved an 86.01 percent yearly increase in profit from January to September, totaling 229.9 billion yuan.

"The business is picking up momentum," he said.

For example, Chongqing Iron & Steel Co Ltd, in its financial report released for the first nine months of 2018, said it had earned 17.4 billion yuan, up a staggering 113.08 percent year-on-year. Its net profit reached 1.48 billion yuan, a strong comeback from the same period last year, which had seen a loss of 882 million yuan.

"The major boost for steel came from the machinery manufacturing, real estate and automobile sectors," said Wen Chenghui, a senior researcher at Qianzhan Industrial Research Institute.

He said the real estate sector was a strong support driving steel demand in the first half of the year, and demand from the machinery sector will remain stable in the following quarter.

The World Steel Association pointed out that as investment activities by developed countries increased and emerging economies gained strength, global demand for steel has been climbing.

It estimated that by the end of 2018, demand for steel and iron products will reach 781 million metric tons, up 6 percent year-on-year. The figure is expected to remain the same in 2019.

On the financial side, Liu said the industry is seeking to lower the leverage ratio to somewhere below 60 percent from 66.11 percent currently.

Although the industry has been on the right track so far this year, Liu said there are still issues at home and abroad that the companies need to be aware of.

"The international trade environment has undergone significant changes, for example, while global economic growth is weakening and the financial market is going through turbulent times," he said. "In addition, with rising trade protectionism, all these factors add more risks to the global steel market."

"Some markets have been turning their back on open trade, which will not only have impact on China, but also severely hurt the global trade order," he added.