Steel factories in Yunnan province, China, are partially reducing production to mitigate losses amid weak market demand and increasing costs such as high iron ore and coal prices. A weaker-than-expected demand recovery following the Lunar New Year holiday stands out as one of the main factors behind the decision to cut production.
Kunming Iron & Steel, a leading steel producer in Yunnan, plans to reduce production by 150,000 tons in March, and has decided to shut down one of its blast furnaces for maintenance as part of this plan.
This situation in Yunnan reflects the challenges faced by the Chinese steel industry due to sluggish demand in the real estate sector. Yunnan stands out as a region facing higher costs and lower demand.
In 2023, steel factories in Yunnan produced 21.2 million tons, accounting for 2.1% of the total production nationwide. However, the increasing stocks of steel producers indicate that demand in the Chinese steel market will continue to remain low.
Major steel companies reported a 12.47% decrease in profits, earning 85.5 billion yuan in 2023. According to the China Iron and Steel Association, the average sales return decreased to 1.32%.
Chinese steel production companies produced 1.019 billion tons of steel in 2023, showing a 0.6% increase from the previous year, indicating a halt in the declining trend in the country's steel industry. Additionally, pig iron production reached 871 million tons in 2023, showing a 0.7% increase.
In conclusion, China's steel sector continues to grapple with challenging economic conditions, and is taking measures such as production cuts to cope with these challenges.
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