China’s steel and oil industries face mounting losses amid economic slowdown
China steel’s industry racked up losses of US$5 billion from January to September, while the oil sector’s losses widened to US$4.5 billion
Chinese commodities producers centred on the old economy are still bearing the brunt of the nation’s economic slowdown, with steelmakers and crude oil processors in particular continuing to rack up losses.
Cumulative losses in the world’s biggest steel industry swelled to 34 billion yuan (US$5 billion) over the first nine months of the year, according to data for September released by the statistics bureau on Sunday. The oil refining sector saw losses deepen to 32 billion yuan over the period. Profits at industrial firms more broadly declined at a faster pace than a month earlier.
Steel mills have been forced to slash output to protect margins hammered by China’s protracted property crisis. Bankruptcies could beckon. Oil refiners are also cutting runs, with weak demand for fuels exacerbated by the country’s rapid uptake of electric vehicles. China wraps its third-quarter earnings season this week, with releases due from both its biggest steelmakers and oil and gas companies.
Steel stocks rallied sharply on Monday after China’s main industry association said it would propose policies to encourage consolidation among members, and urged firms to refrain from cutthroat competition.
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China sees slowest economic growth in over a year with 4.6% GDP in third quarter
Beijing’s recent measures to stimulate the economy are being closely watched for their impact on raw materials demand. Oil consumption could get a modest lift, according to Goldman Sachs, although the focus on clearing China’s housing stock rather than boosting new starts will limit the impact on the steel market.
