Overcapacity sends China's steel sector into loss

BEIJING - China's iron and steel industry reported a loss of 699 million yuan ($113 million) in June, the first monthly deficit that the overcapacity-troubled industry has seen this year.

For the first half, the profits of members of the China Iron and Steel Association (CISA) hit 2.27 billion yuan, with an average profit margin of 0.13 percent, the lowest among all industries, said the CISA on Wednesday.

Steel prices have been dropping since February. At the end of June, the price of steel products fell 6.45 percent compared with the beginning of this year, and down 14.7 percent year on year, according to the CISA.

Oversupply in the steel sector will continue amid the country's economic slowdown, the CISA warned, as the country has been pushing forward economic reforms.

China's economic growth slowed to 7.5 percent in the second quarter from 7.7 percent in the first three months, as the government deliberately tamed the pace to avoid bubbles.

The CISA once urged steel companies to rein in excess production before actual contracts and transactions, a call which was widely ignored by mills afraid to lose market share and loans, as well as bearing pressure from local governments.

China's output of pig iron, crude steel and steel products still expanded to 357.54 million tons, 389.87 million tons and 516.96 million tons in the first half, up 5.7 percent, 7.4 percent and 10.2 percent year on year, respectively, according to the CISA.

Moreover, the amount of steel being stored by CISA member mills increased 225,000 tons, up 1.75 percent year on year, which further lifted the business cost, the CISA said.

During the January-June period, CISA members saw their sales revenues reach about 1.8 trillion yuan, up 0.94 percent year on year. But 35 out of 86 CISA members reported losses, the association added.