The decline in steel demand in China and the increase in coke prices have put pressure on the profitability of steel mills. Futures prices for rebar in China have fallen to less than 3,100 yuan (about $440) per ton, indicating an unstable market situation.
Drop in Steel Mills' Profitability
Industry data shows that the profitability of steel mills in China has decreased to 7.79% in the past week. This drop in profitability has arisen due to high production costs and rising coke prices. Producers have been forced to reduce their activities and conduct maintenance to cut costs.
Read more: Copper price drops to $6.4 following the Federal Reserve's interest rate hike
Decrease in Demand and Recession in the Housing Market
In the third quarter of this year, steel demand in China has sharply declined, which is related to the recession in construction activities. The prices of new homes in China also continued to fall in August, indicating the negative impacts of the prolonged recession in the housing market on steel demand. This situation has put further pressure on producers, encouraging them to reduce production and cut inventories.
Additionally, the leading industrial association in China last month urged producers to voluntarily reduce their output. This action has been proposed to lower inventories and revive profitability after a challenging first half of the year.
Read more: Saudi Arabia discovers 110 million tons of uranium-containing mineral in Medina · Fathollah Hosseini emphasized the need for CNG development in the country
