China's Steel Industry Reports Loss of $6.95 Billion in the Fourth Quarter of 2008

In December 2008, China's steel industry lost $4.25 billion, up 129 percent compared with November, according to an official of the China Iron and Steel Association (CISA). Industrial Info Resources (Sugar Land, TX) reports that the industry lost $847 million in October, which was the first monthly loss reported in the past six years. In November, losses increased to $1.85 billion. For the quarter, the industry lost $6.95 billion. For the year, China's steel industry reported a profit of $12.4 billion, down 41 percent compared with 2007.

Regarding the sharp increase in losses in December, the low price of steel was just one of several reasons. One of the major reasons was of the setup of provisions for declines in inventory values, an analyst from Mysteel.com said.

Statistics also showed that the losses of large steel producers were even higher than others in December 2008, except Shagang, the largest private steel producer in China, which had reported a profit in the month, a CISA official said. The reason was mainly due to a problem in product structure. Enterprises mainly engaged in the production of high add-on products, such as sheet steel, experienced a sharper decrease in demand. The market situation of ordinary bar steel was relatively better because of the nation's stimulation on domestic demand.

The market is recovering as the price of steel is experiencing a rebound, the CISA official said. Daily output has been increasing, and in December, China's daily output reached 1.22 million metric tons. In January 2009, the average daily output was 1.29 million metric tons.