Due to sluggish domestic demand due to stagnant economic growth and rising costs of raw materials such as coal, many Chinese steel companies, including Hongxing Steel and Angang Steel, have suffered huge losses. Financial pressure has intensified, prompting them to export more production capacity overseas. But like automakers selling excess production overseas, this response to falling profit margins could exacerbate global trade tensions.
Foreign media reported that Angang's net loss in the third quarter was NT$1.98 billion (the same below, NT$9.71 billion), more than doubling the net loss of NT$876 million in the same period last year. The loss in the third quarter alone was equivalent to the net loss of NT$2.04 billion in the first half of the year. The company pointed out that the steel industry is in a weak cycle, with sluggish market sentiment and oversupply leading to falling prices; in addition, the prices of coking coal and other raw materials and fuels have also continued to rise.
Angang said it had taken further cost-cutting measures, but they were still not enough to make up for the gap caused by the narrowing of purchase and sales spreads.
Hongxing Iron and Steel, a subsidiary of Gansu Jiugang Group controlled by the Gansu Provincial Government, recently announced a net loss of 813 million yuan in the third quarter, far exceeding the net loss of 61 million yuan in the same period last year, and expanding from a net loss of 216 million yuan in the first half of the year. The company's revenue in the third quarter decreased by 3.4% year-on-year to 7.8 billion yuan, while revenue in the first half of the year increased by 3.6% year-on-year to 16.1 billion yuan.
Hongxing Steel bluntly stated that the steel industry has strong supply but weak demand, including the continued shrinkage of real estate and infrastructure demand, highlighting the current sharp decline in China's domestic fixed asset investment; at the same time, some fuel and material costs remain high, and these conditions have worsened, especially after entering the third quarter, due to low steel prices and fuel price volatility.
Xinjiang 800 million Iron & Steel, a subsidiary of China's Baowu Steel Group with the largest production capacity, turned from profit to loss in the third quarter, from a net profit of 124 million yuan in the same period last year to a net loss of 220 million yuan. The company said that in view of the severe domestic market situation, it will further "explore" neighboring Tibet and overseas markets.
China's steel exports, fueled by chronic overcapacity and weak domestic demand, have become a core issue in trade frictions with the rest of the world. In order to ease tensions, the Beijing authorities began to implement a new export license system at the beginning of this year. The Ministry of Commerce and the General Administration of Customs jointly published a list of nearly 300 controlled steel products.
The move appears to be having an impact. China's total steel exports in the first nine months of this year fell by 2.6% compared with the same period last year. Despite this, the export volume is still considerable, and the growth rate has accelerated: finished steel exports reached 10.49 million tons in September, exceeding 10 million tons for the fifth consecutive month.
Alicia Garcia-Herrero, chief economist of the Asia-Pacific region at Natixis, said that governments around the world are wary of the impact of Chinese exports, and products such as steel, chemical products, and electric vehicles have all attracted much attention.
Some Asian countries have already taken defensive measures. For example, India has imposed a three-year defense tax of 11% to 12% on Chinese hot-rolled steel coils, and Vietnam has imposed an anti-dumping tax of up to 27.8% on Chinese hot-rolled steel coils.
