China's steel oversupply problems are likely to worsen in 2013 with new capacity increases expected to outstrip rising demand over the year, the chairman of Baoshan Iron and Steel the country's biggest steelmaker by market value, said on Monday.
He Wenbo, head of Baosteel, told shareholders in an online briefing that China's crude steel production was expected to rise 2.9 percent to 737 million tonnes in 2013, with apparent consumption reaching 698 million tonnes, up around 4 percent from 2012.
But total capacity was now estimated at 920 million tonnes, putting total utilisation rates at around 78 percent in 2012, with the figure likely to fall further this year.
“Looking at the capacity increases in 2013, we predict that utilisation rates will fall to about 75 percent, and the sector continues to face serious market pressures,” He said.
China has been trying to drive its fragmented steel sector to consolidate, with the aim of putting around 60 percent of total capacity in the hands of its top 10 mills by 2015.
He said that Baosteel, which has a market value of about $13 billion, didn't yet have any solid new consolidation plans, but said that the primary consideration would be improving the company's competitiveness, rather than boosting total capacity.
Baosteel's net profit in 2012 rose 41 percent to 10.39 billion yuan ($1.67 billion), compared with 7.36 billion yuan a year earlier, thanks to a one-off sale of some of its unprofitable assets, the company said last week.
Operating profit before one-off items fell 32.7 percent to 4.72 billion yuan, the Shanghai-based company said in a filing to the Shanghai Stock Exchange.
A large number of Chinese steel mills, including state-owned ones, posted big losses last year, as cooling economic growth hit steel demand, reducing margins already hurt by overcapacity, weakened demand from the real estate sector and soaring raw material costs. China is the world's largest steel producer and consumer.
Source – Reuters
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