Chinese Steel Industry in the next 12 month

"In the next 12 month, the Chinese steel market will be in a further deterioration situation due to the weak domestic demand in China."Moody's Investors Services Company said. Under the situation of economic slowdown in China, the investment development of real estate and infrastructure has slowdown, and also the steel manufacturing is still weakening. In addition, due to the decline rate of eliminate production capacity is slower than the rate of deceleration in demand, the profitability for Chinese steel manufacturers will be further weakened. The slowdown of domestic demand exacerbated the over capacity situation in Chinese Steel Market which lead to the Chinese steel pirice fell to the historic low.

Moody expect that in the next 12 months, Chinese domestic steel demand will decline 5%. Although the export growth can release part of pressure created by the falling domestic demand, the overall sales in the steel industry will continue to decline 3% to 4%. Due to the fall in raw material prices are no longer able to offset the steel price decline in the maket, according to the Chinese Iron and Steel Industry Association, in 2015 the profit of medium-sized steel companies has to face a loss in the previous 8 month. However, many companies keep struggling by halting production and selling other assets, which slowdown the process of reducing the production capacity in the market.

Overall, many small companies will be the first batches exit the steel market due to the financial pressure and limited resources. Moody's believes that in the next 1 to 2 years the production capacity will keep reducing and the restructuring process will keep accelerating. However, Baosteel Group Corporation, Shinestar Holdings Group and other leading companies will gain more market share due to their product strength and capacity expansion.

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