China's steel industry, the world's largest, is facing a crisis more serious than the downturns of 2008 and 2015, according to Hu Wangming, chairman of China Baowu Steel Group Corp. The crisis is likely to be "longer, colder and more difficult to endure than we expected," Hu told the company's half-year meeting.
Baowu Steel, which produces about 7% of the world's steel, urged its employees to focus on preserving cash and minimizing risks to navigate the tough times ahead. The company recommends that financial departments pay more attention to securing financing, strengthening control, and detecting overdue payments and fictitious transactions.
The downturn is driven by declining domestic demand and falling prices, with steel mills struggling with mounting losses. Iron ore inventories are piling up, and reinforcement bar prices have hit their lowest levels in years, making it increasingly unprofitable for mills to produce steel.
Despite the domestic challenges, Chinese steel exports are expected to exceed 100 million tons, the highest since 2016, creating concerns for global steel producers. The situation in the Chinese steel market has global implications as iron ore prices are weakening, and the country is increasing steel exports, exacerbating global trade disputes.
The Chinese authorities' current economic strategy, which focuses on reforms rather than large-scale stimulus measures, makes the prospect of a similar recovery as in 2008-2009 and 2015-2016 less realistic.
