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China’s ferrous metal smelting industry generated a revenue of 4.578 trillion yuan in the first half of the year, falling 3.6% from a year earlier, and profits slumped by 68.7% to 82.6 billion yuan, according to data released by the National Bureau of Statistics on Wednesday.
In June alone, they made 2.41 billion yuan in profits in June, slumping 93.8% from a year earlier, sharply lower than 14.2 billion yuan in April and 23.7 billion yuan in May,
The ferrous metal smelting industry consists of iron-making, steelmaking, steel press forging and iron alloy smelting.
The steel industry has been suffering losses since mid-March. According to data from consultancy Mysteel, among the 247 companies tracked by the agency, only 9.96% were making profits as of July 22, compared to 81.39% on March 18.
About 80% of the 25 listed steelmakers that had released first-half earnings forecasts as of July 27 expected net losses or declines in profits, with only five companies forecasting positive growth, according to consultancy Lange Steel.
The plunge in steel profits was attributable to sluggish steel demand as the real estate sector, which accounts for around 30% of China’s total steel demand, is experiencing a downtrend.
In the first six months of the year, China’s property sales by floor area slid 22.2% from a year earlier, and the value of the property sales tumbled by 28.9%, according to official data. In June alone, sales recovered from the previous month, but remained around four-year lows.
In the first half, real estate investment fell 5.4% from a year earlier, and in particular, new construction starts by floor area tumbled by 34.4%. In June alone, new construction starts, new completions and land acquisition plunged by 45%, 41% and 53%, respectively, from a year earlier.
In addition, prices of steelmaking materials including iron ore, coking coal and coke have been elevated which also squeezed steelmakers’ profit, said industry insiders.