| DALIAN, China, Sept 22
DALIAN, China, Sept 22 China's steel demand is
likely to drop for a third year in a row, an industry official
said on Thursday, as mills in the world's top producer focus on
China's crude steel consumption slipped 1.9 percent over
January to July and there may be a slight drop for the year,
said Wang Liqun, vice chairman of the China Iron and Steel
"For the whole year, the rate of decline may be smaller,"
Wang said on the sidelines of an industry conference.
Driven by a drop in China's steel inventory levels amid
shutdowns in the past year, steel prices have rallied
more than 40 percent from end-May to mid-August, but have since
fallen back as output recovered.
The price rally helped boost steel margins among member
mills of CISA, which includes major producers such as Baoshan
Iron and Steel (Baosteel).
On average, profit margins among mills stood at around 1
percent in January-July, Wang said. Data from Baosteel shows
margins were at minus 2.2 percent for China's large and
medium-sized steel mills last year.
For the rest of 2016, it would be very difficult for the
margin to rise further "but if we can keep it at 1 percent it
would be very good", CISA's Wang said.
Ji Chao, assistant to Baosteel's president, said the market
needs to "get used to this new scenario of slower, steady growth
At the moment, the priority for China's biggest listed
steelmaker is to reduce capacity, in line with Beijing's efforts
to tackle a chronic glut, Ji said at the conference.
Baosteel has pledged to cut its production capacity by 9.2
million tonnes in three years. It is also taking over
loss-making Wuhan Iron and Steel to create the
world's No. 2 steelmaker as part of Beijing's push to overhaul
the stricken industry.
Faced with global anger from Asia to the United States and
Europe over a flood of cheap Chinese steel products, Beijing has
promised to cut steel capacity this year by 45 million tonnes
and by 100-150 million tonnes over five years.
By the end of July, China had only achieved 47 percent of
its 2016 target and steel exports in the first eight months had
risen 6.3 percent from a year ago to 76.35 million tonnes.
The consolidation and capacity cuts in China's steel sector
are meant to strengthen the competitiveness of domestic
producers and should not just be a matter of meeting target
numbers, said Wang.
(Reporting by Manolo Serapio Jr.; Editing by Himani Sarkar)