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Manufacturers China again profiting

11 July 2016

Iron and steel Association CISA, China announced the results of operations of medium and large steel companies. Took into account the performance of the companies within the Association. Was assessed a five-month period January-may 2016. Operating profit of companies in the aggregate amounted to 8.74 billion yuan. Translated into dollars, the revenue amounted to 1.31 billion USD. This figure compared with the same period above 8 times. The share of unprofitable enterprises in the period decreased to the level of 28.3%. In 2015, the figure was 40%.

The opinion expressed Liu Zhenjiang, head of the CISA. Closing excess capacity gave the opportunity to stabilize the price of the metal. In November 2015, prices reached a minimum. Now the situation is aligned, metallurgists had the opportunity to improve financial performance. Another positive factor for domestic firms is the export growth. For five months of 2016, it amounted to 46.3 million tons. Compared to 2015 year the results have improved by 6.4%. The Chinese government continues to declare further stop loss-making enterprises. The main purpose of these measures is the preservation of a balance in the construction sector of China. Also stops excess capacity contributes to reducing pollution. The task for China is very important.

However, the CISA may be overly optimistic. A statement by the Association of returning companies to profitability is a bit premature. From March to may , the cost of rental and high demand has really provided a high income. In June the yield of the national metallurgists decreased almost to zero. Survey companies have published their own results. In accordance with them in June relative to may recorded a decrease of PMI. For the metallurgical sector at the end of last month the value was 45.1. Relative to the previous month result is lower by 5.8 percentage points In comparison with April, the PMI reading fell to 12 PCT

Experts expect a stagnation in the industry of China. National producers are hoping for some increase in domestic orders. It is also expected further decline in the external market. Also metallurgists are tuned to a certain employment. Overall, the figures look quite alarming. It is possible to further slowdown of the national economy in the second half.

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