Reducing Production of Crude Steel is the positive signal for industry restructuring.
Overcapacity in the Chinese Steel Industry still exist, but the reducing production of crude steel seems to be the first ray of dawn for steel industry restructuring in China. Last Week, the latest data announced by the Chinese Steel Association showed that in December 2015, the average daily production for crude steel is 1.5685 million tons which has a reducing rate of 0.62%. This is the first negative growth of crude steel production in China since 1981. According to the industry opinion, this first drop of crude steel in the last 34 years would be a positive signal in the Chinese Steel Industry which means in China the steel industry has towards to a capacity reducing period.
Based on the latest blast furnace steel plant survey, till December 2015, the last furnace capacity utilization rate is 74.03% with a reducing rate of 1.11%. The capacity utilization is 90.02% with a 0.58% reducing rate. According to the summarize from the analysts, the steel production reducing is a positive signal showed that the steel production restructuring time has come.
In January 5, the Chinese Academy of Sciences predicted that in 2016 the Chinese Steel Industry will continue to maintain in the downturn. The annual crude steel production in 2016 will be about 786 million with a reducing rate of 3.1%.
Data also showed that in 2015 the Chinese Steel consumption is about 668 million tons with a reducing rate 4.8%, which is the first decline in 1996. In the next 15 years, this consumption reducing will be continued, the Chinese steel demand is expected to decline to less than 500 million tons in the year of 2030.
In fact, the current steel industry in China has a serious excess capacity, the corporate has enormous pressure to survive, and part of enterprises have strong desire to quit. Information from the Galaxy Securities showed that due to the steel prices unsustainable, the funding chain has broken in some companies. It has become a new consensus in the Chinese Steel Industry that for those companies it is just a time problem to quit the market.
