Steel production are on the decrease
The amount of steel which are produced in China had decreased recently and this could be due to the slower rate of growth since the global recession. According to statistics the steel production are approximately 1.7% lower than at the same time last year. This is the first time since 1995 that this kind of reduction are experienced. This has led to a lot of assumptions on the part of investors and financial experts who are seeing this as an indication that the world’s largest producer of steel are suffering because of the slower pace of exports and also construction requirements. There are a lot of indications that steel production can fall even further especially as the Chinese government are implementing measures to avoid a situation where too much steel is produced. There are also an increasing concern about pollution of the environment and the Chinese government are implementing several measure in order to stimulate the world’s second-biggest economy and to find ways to streamline services and consumption.
Struggle for survival
It is a well-known fact that China has been closing down some of their steel mills and that’s why it is surprising that steel production hasn’t dropped further. The reality is that those production installations which have been closing were the ones that were not cost effective and that were causing a lot of pollution but this void has been filled almost complete by the larger steel producers so that most of those losses were eliminated. Despite all of these economic difficulties the Chinese gross domestic product had actually increased by 7% when compared to the same period last year. This is more or less in line with forecasts which has been released. The usual demand for steel in order to supply the construction industry has decreased by almost 2.0% and likewise the output of pig iron which is used in the steelmaking process has decreased by 2.3%. It wasn’t only the steelmaking industry which has suffered but even producers of cement products have seen a substantial decrease, in fact the largest since 1995.
China a global steel giant
China has been the largest buyer of raw material which is used in the steelmaking process for many years. However under the current economic conditions the demand for iron ore is expected to remain limited due to the significantly lower demand for steel products. The current economic conditions are making it very difficult for the steel manufacturing installations in China to maintain their current output. This has led to a situation in which China has been seeking alternative markets for their excess steel. This had a very negative effect especially on the South African steel market were large Steel manufacturing installations are either closing down or are substantially reducing their workforce because they cannot compete with the cheap steel which are dumped on the market by the Chinese. This is expected to have a very negative impact on the South African economy because of its dependence on iron ore exports especially to China.