China Metals Prepared For The Worst Quarter

The Chinese steel industry is likely to see its worst period in the 1st quarter of 2014, warned Liu Zhenjiang, deputy director of the China Iron and Steel Industry Association (CISA).

CISA is tracking a loss of one billion yuan in January alone. Moreover, 43 capacities are operating in the red, which is the highest percentage within one month. The losses doubled to two billion yuan in February.
Volatile demand and tightening environmental standards further weakened the steel industry, along with other factors such as a tight lending program and suppression of overcapacity.

Steel demand in China fell 8.6 percent in January from a year earlier, while production fell 3.2 percent. The CISA steel price index fell to a 20-year low.

Liu Zhenjiang advised metallurgists to cut both capacity and actual production and move up the value chain to increase margins as well as operating efficiency. The good news is that the price of iron ore imports is expected to continue to plunge in the $ 100-110 /t range this year.

Over the last 10 days of February, China's steel production totaled 2.08 million tonnes per day, an increase of 5.9 percent over the previous 10-day period. This was the highest level since late November 2013, according to the China Iron and Steel Industry Association (CISA).