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On the 14th, the China Iron and Steel Association (CISA) reported that large and medium-sized steel enterprises in the industry remain in a loss-making situation. Except for slight profits in March, April, and May, all other months have been operating at a loss, with losses increasing month by month. In September alone, the loss amounted to 2.376 billion yuan, a decrease of 1.82 billion yuan compared to the previous month, primarily due to an increase in investment income by 1.966 billion yuan. However, the losses within the steel industry itself have not decreased.
From January to September, these steel enterprises collectively incurred losses totaling 5.628 billion yuan, a significant improvement compared to the 83.692 billion yuan lost during the same period last year. Nevertheless, the number of loss-making enterprises increased dramatically, with their losses surging 41.5 times year-on-year, accounting for 45% of total operations, an increase of 38.75 percentage points compared to the previous year.
In response, Wang Xiaoqi, CISA's vice president, noted yesterday that investments in railway construction and real estate development have both seen negative growth. Additionally, the shipbuilding industry has witnessed a sharp decline in new orders and order bookings. Consequently, industries such as machinery, automobiles, and home appliances have experienced a slight decline or minimal growth in industrial output values (product output).
Financial strains have become evident for some steel companies. According to CISA data, large and medium-sized steel enterprises saw financial expenses reach 61.219 billion yuan in the first three quarters, a year-on-year increase of 29.18%. By the end of September, the debt-to-asset ratio had risen to 68.49%, up 2.02 percentage points from the previous year.
Fortunately, steel prices began to stabilize slightly after September. Wang Xiaoqi stated, “In the fourth quarter, national fixed-asset investments are expected to grow significantly, driving a recovery in steel market demand. Weak demand for steel products should improve.â€
In September, the National Development and Reform Commission approved 25 new urban rail transit projects, 13 highway projects, and 13 new railway projects. The number of new railway projects increased from 9 at the start of the year to 22, with the railway fixed-asset investment plan rising from 561 billion yuan to 630 billion yuan.
Wang Xiaoqi cautioned that although steel prices may rise temporarily, sustaining this trend will be challenging, and market stability remains uncertain.
Regarding whether steel prices will be regulated, Wang Xiaoqi explained that steel futures serve as effective tools for enterprise hedging. However, the physical delivery needs account for less than 5% of total demand, limiting their impact on the broader steel market. He added that as of September 7, the CSPI domestic steel comprehensive price index dropped below 100 points, the lowest level since June 2009. Although there was a slight recovery toward the end of September, rapid rebounds in raw material prices continue to exert high cost pressures on steel companies.
Despite these challenges, the industry remains hopeful about the future. Wang Xiaoqi concluded, “We must remain vigilant while preparing for potential changes in the market.â€