Posted on 21 Apr 2016
Tata Steel recently decided to pull out of its British operations, while Australian steelmaker Arrium has fallen into voluntary administration. ArcelorMittal, the industry leader, has posted a net loss for four straight years and China’s major steel mills reported combined losses of Rmb11.4bn ($1.76bn) for the first two months of this year.
Analysts now expect Chinese steel prices to continue rising until May or June but have warned that the problem of overcapacity in the industry will not be resolved any time soon.
Despite growing international pressure to cut overcapacity, China’s output hit a record high last month with its steel exports surging 30 per cent in March from a year ago.
“Although Beijing is talking about restructuring, its action has not been so strong,” said Byun Jong-man, an analyst at NH Investment & Securities.
“A sustainable recovery in steel prices is not just about the steel industry cycle but about demand from steel-intensive industries such as shipbuilding, automobiles and chemicals. So it is hard to expect an earnest turnaround without a recovery in the Chinese and global economy.”
Posco’s share price jumped 3.8 per cent on Thursday before the earnings announcement, closing at Won 248,500 — its highest closing level in 11 months. It is now 50 per cent up in the year to date, on strong foreign buying.
