Quotes from Commerzbank Corporates & Markets:
–Base metals: According to the China Iron & Steel Association (CISA), apparent steel demand in China in the first six months of the year inched up by a mere 0.4% year-on-year to 376 million tons. It has thus clearly failed to keep pace with the expansion of production, which grew by 3% to 412 million tons. In other words, the Chinese steel market remained significantly oversupplied, as also evidenced in the high production capacities.
-The CISA estimates that the country had capacities of 1.106 billion tons p.a. as of the end of last year and that the utilization rate was only 74.3% (equivalent to 822 million tons of manufactured steel). In the meantime, capacities are likely to have been further expanded to 1.14 billion tons p.a. Although the government has made attempts and taken steps to tackle the problem of the overcapacities, closing down outdated production plants is a difficult process, claims the CISA.
-Until progress can be made here, Chinese steel manufacturers will continue to battle with low prices, high competitive pressure, low margins and high debt levels. In the CISA’s view, this situation is unlikely to change much in the near future – exports will bring no relief as the Chinese steel industry faces numerous anti-dumping lawsuits. That said, the high rate of steel production does contribute to robust demand for iron ore.
The material has been provided by InstaForex Company – www.instaforex.com