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Oxford Economics warns of deeper cuts in largest steel maker-The 17th China(Guangzhou)Int¡¯l Spring Industry Exhibition
1/26/2016 Spring Industry expo |
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Bloomberg reported that according to Oxford Economics Ltd, the downturn in China¡¯s steel industry will intensify this year as output contracts by more than the drop seen in 2015. Mr Louis Kuijs, Hong Kong-based head of Asia economics, said ¡°Poor local demand, stiffer opposition to exports and tumbling prices will combine to spur deeper cuts to output in the world¡¯s top producer, That¡¯ll contribute to weaker iron ore prices.¡±
He said ¡°¡°The demand prospects for Chinese steel companies are pretty meager, so you¡¯d expect them to cut supply. It¡¯ll have to fall by more than last year.¡±
He said ¡°I¡¯m not very optimistic about domestic demand for steel and it¡¯s simply not possible to offset this by exporting more. If the capacity isn¡¯t cut then we¡¯ll continue to be in this situation where loss-making companies either just keep on going because they want to hold up market share, or they keep on going because they¡¯re asked to do so by the local government.¡±
E added ¡°In terms of size and intensity of problems, I think steel is really the poster child. I¡¯d want to see first some more high-profile steel companies either being closed down or cutting their capacity radically before I become convinced that we¡¯re going to see that progress in 2016.¡±
He also said ¡°¡±They¡¯re trying to cut costs, increase productivity in their industry to basically crowd out other suppliers. The more we get this kind of behavior on the supply side, the more you¡¯d expect iron ore prices to continue to fall in the context of pretty weak demand from China and globally.¡±
Mills in China, which account for half global output, are battling losses, overcapacity and sinking prices as the economy slows, and data on Tuesday showed crude-steel production shrank 2.3 percent in 2015 to post the first annual decline since at least 1991.
Steel production in China totaled 804 million metric tons last year from 823 million tonnes in 2014, according to official data. Citigroup Inc. has forecast that output will contract to 788 million tons this year, while the China Iron & Steel Association sees a decline to about 783 million tons.
-The 17th China(Guangzhou)Int¡¯l
Spring Industry Exhibition
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