China’s Steelmakers Narrow Losses But Conditions Still Bleak

Chinese steelmakers narrowed losses in October, after the government’s efforts to stimulate the economy encouraged more production and helped raise prices.

Cumulative losses in the world’s biggest steel industry shrank to about 23 billion yuan ($3 billion) in the first 10 months of the year, from 34 billion yuan over nine months, according to the statistics bureau on Wednesday. Still, overcapacity and the impact on demand from China’s property crisis mean that steel remains one of the worst-performing corners of the economy.

But the sector has flickered into life over the past couple of months. Near-record exports and weak stockpiles have helped, while gains in output look to have continued through November, despite the advent of the low season when activity typically cools. A recent Mysteel survey found that more than half of mills are profitable, after a collapse in margins earlier in the year.

Iron ore futures rose 0.7% in Singapore to $103.25 a ton. The steelmaking feedstock is 2.7% higher this week, tracking the improved fortunes of steel mills.

But whether more favorable conditions can last is highly debatable. Construction is slowing as the weather gets colder, rising protectionism around the world is likely to curb exports, and Beijing’s stimulus hasn’t targeted the areas of the economy — like housing starts or large-scale infrastructure — that matter most to the steel market. 
Profits at China’s industrial firms broadly declined for a third month, dragged down by deepening deflation in producer prices and slower growth of factory output.