Chinese steelmaking relies on consumers

After a harsh winter, China's steel industry must prepare for a tough year ahead. But there are positives for the consumer-oriented portion of the sector.

China's top steelmakers suffered a $ 368 million loss in the first quarter, the worst three-month period since 2000, according to the China Iron and Steel Association. In China, new skyscrapers and roads consume 56 percent of the metal and are seriously affecting the industry.

The slowdown in construction jeopardizes the so-called long steel products, such as rebar and wire rod, which are used in construction. Their local prices are down 4.5 percent from a year earlier.

"Flat" products such as rolls or galvanized steel are heavily used in the manufacture of automobiles or appliances that consumers buy. Overall, flat product prices were in a better position, dropping 1.6 percent from last year.

Passenger car sales are forecast to show 10% CAGR over the next three years. This is a boon for the demand for the metal, given that China uses only 6 percent of its total steel to make automobiles. In addition, there is an opportunity to climb in Europe or the USA.

Prices for these two product groups can vary over time. Sections currently account for 64 percent of China's steel demand. China is also exporting steel rods, filling the global market and dampening demand and driving down prices.