Beijing – China’s steel industry is on the edge of a wave of bankruptcies as a prolonged crisis reshapes the sector, according to Bloomberg Intelligence . In a recent report, senior analyst Michelle Leung revealed that nearly three- quarters of the steel producers in the country reported losses in the first half of the year. Resulting, many are now facing bankruptcy, including major players like Xinjiang Ba Yi Iron & Steel Group, Gansu Jiu Steel Group, and Anyang Iron & Steel Group Co. amongst those at highest risk of collapse.
The potential bankruptcies are expected to accelerate a consolidation within the steel industry, aligning with Beijing’s efforts to increase market concentration. The Chinese government aims for the top five companies to control 40% of the market by 2025, along with the top ten accounting for 60%. According to reports, these targets are “achievable “, even though China still lags behind regional competitors like South Korea and Japan in terms of the industry consolidation.
Impacts on steel
China’s persistent property crisis and slowing economic growth is reshaping the country’s massive steel industry, with the head of its biggest producer, China Blow Steel Group Corp., warning the industry of the last month crisis as more severe than in 2008 and 2015. A sharp decline in domestic demand meant that steel mills have maximised the exports, triggering backlashes from International trading partners who say the metal is being dumped at low cost.
However, China’s steel exports will remain elevated until at least the end of 2026, as production is expected to decline in the coming years, more trading partners impose restrictions limiting the industries recovery, as reported by Bloomberg.
China’s Economic Outlook
In light of the current Challenges, China’s real estate crisis continues to overshadow its economy. However, their housing rescue packages offers the best path, being a turning point, with hopes that it will put the country back on its track to expand around 5%, as per economists, in the face of this crisis expected to last as long as 5 more years.
To support consumption, China’s banks may carry out a new set of mortgage rate cuts this year as per analysts’ reports.
Citigroup Inc.’s expansion plan in China has encountered obstacles with the U.S. Federal Reserve imposing penalty over the bank’s data management and risk controls, reports say.