China's steel sector has made great strides in the first half of the year

According to experts, thanks to deepening reforms in the country, China's steel industry achieved steady growth in the first half of 2017. This refers to the government's efforts to reduce production capacity and reduce demand for low-quality steel.

Steel production in the first half of the year amounted to 420 million tons, which is 4.6 percent more than in the previous year, according to Metallurgical news .

“The slight increase ... shows that demand for non-standard steel, mainly used in the construction industry, has shifted to legally normalized steel mills,” said Wang Guoqing, research director at Beijing Lange Steel.

As of the end of May, the decline in steel capacity in China amounted to 84.8 percent of this year's target of 50 million tons.

“CISA member companies are actively involved in monitoring the elimination of illegal steel production,” CISA chief Jin Wei said Friday at an industry conference. Along with an increase in production in the first half of the year, prices also increased, which contributed to the profitability of metallurgical enterprises.

The average steel price of CISA member companies was 3,325 yuan ($ 493) per tonne in the first half, up 49.1 percent from the previous year, official data showed. Wang noted that prices also respond to a decrease in oversupply, which ensures that the market is fair and balanced.

However, the average profit of CISA member companies was only 160 yuan per ton, with some nearly breaking and others still losing money, Wang said. “In the steel industry, compared to other large industrial sectors, manufacturers still face funding challenges and high costs,” he said.

Experts warned that just because conditions have improved, China should not back down on efforts to curb substandard steel smelting and illegal furnaces for the remainder of the year. Otherwise, problems may return.

Another important factor for the steel industry is exports, which fell 28 percent year on year in the first half, according to customs officials.
“Higher domestic prices have caught the attention of Chinese steel producers, while the protectionism of international trade has had some impact on exports,” said Li Xinchuan, president of the China Metallurgical Institute for Planning and Research.

Pollution control is another challenge facing industry. China is expected to release a new one by the end of this month.