According to a Bloomberg report, American investment banking company Goldman Sachs Group Inc. expects Chinese steelmakers to endure a prolonged period of weak profitability amid slower-than-expected progress in capacity cuts and persistently strong export volumes.
The bank cut its earnings forecasts for Baoshan Iron & Steel Co. and Maanshan Iron & Steel Co. for fiscal years 2026-27. At the same time, it is expected that Angang Steel Co. will suffer steeper losses over the same period.
Goldman Sachs also revised down its gross margin forecasts for key products including rebar and hot-rolled coil. The bank said it now expects prices to improve only marginally and has a less optimistic outlook for the sector than before.
Structural reforms face near-term headwinds
Near-term challenges with so-called anti-overcapacity or "anti-involution" measures include meeting ultra-low emissions requirements and reclassification of manufacturers who meet these standards. These factors are slowing the pace of effective capacity reduction, even as policy efforts to address excess capacity continue.
Despite these headwinds, the bank indicated that long-term initiatives aimed at containing excess capacity are still expected to continue.
Implications for iron markets ore
A more cautious outlook from Chinese steel companies could also weigh on sentiment in the iron ore market. Goldman Sachs said strong steel exports could partially offset weaker domestic performance.
Iron ore prices have traded in a relatively narrow range of $102-$108/t since late August last year after a mid-year rally. Meanwhile, inventories at Chinese ports have risen to their highest level since November 2024, according to data from Shanghai SteelHome E-Commerce Co., adding to pressure on the short-term outlook.
