Forbes reports:
China said this week the country’s GDP grew by 9.1% in the third quarter from a year earlier, among the best growth rates in the world. Industrial production climbed by 13.8% during the period.
Yet if China’s economic growth rate is so good, why is its steel industry, the world’s largest, is such trouble?
Much of the industry will suffer losses in the last quarter of the year, according to Lan Jie, an analyst at Industrial Securities in Shanghai. “That might continue into the second or three quarter of next year,” he said today in an interview. That’s already hit shareholders in China’s biggest steel companies hard. Hong Kong-listed Angang Steel has lost 64% so far this year; Shanghai-listed Baoshan Iron & Steel is off by 17% and Wuhan Iron & Steel has lost 17%; and U.S-traded General Steel Holdings has tanked 59%.
The answer isn’t so much on the demand side of the business. Demand for crude steel will probably total about 660 million metric tons in 2011, a rise of about 10% from last year. That’s less than the increase in GDP because of soft business in real estate, equipment, machinery and autos, Lan says.
A bigger problem, as in many other government-backed industries in China, is oversupply.
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