Production growth fell year-on-year in the same period
China's steel makers saw a 35.5 percent profit slump year-on-year in the first four months of 2015, according to official data released on Thursday, and analysts expect their financial difficulties to continue.
China produced 361.09 million tons of steel in January to April with 2.1 percent year-on-year growth, which is 3.8 percentage points lower than growth last year, the National Development and Reform Commission (NDRC) said in a statement on Thursday.
Meanwhile, the average steel price index dropped to 73.99 in April, 21.76 points lower than the same period in 2014, according to the NDRC.
Steel manufacturers' profits in the first four months slumped 35.5 percent year-on-year to 25.66 billion yuan ($4.14 billion), the official data showed.
"So far this year, the steel manufacturing industry is still in a difficult situation due to the weak market demand," Wang Guoqing, a research director at Beijing Lange Steel Information Research Center, told the Global Times on Thursday.
The sluggish real estate sector and manufacturing industry led to declining demand for steel, Wang said.
China's new floor area under construction saw a 17.3 percent year-on-year decrease from January to April, according to data from the National Bureau of Statistics on May 13.
The flash HSBC/Markit Purchasing Managers' Index (PMI) for May came in at 49.1, -slightly high than 48.9 in April but still down from March's 49.6. A reading below 50 indicates production -contraction.
"Although the Chinese government has rolled out a batch of policies that could benefit the real estate industry, the property market will not be prosperous enough to boost steel making," Jiang Zeren, an analyst at consultancy Sublime China Information Group, said in a research note e-mailed to the Global Times on Thursday.
Most Chinese cities are faced with an aging population and population outflow, so the rigid demand for homes will continue to shrink, according to Jiang.
China has launched some policies to encourage investment but capital is unlikely to go to overcapacity-plagued industries such as steel manufacturing, Jiang said, noting that in addition to weak demand, Chinese steel makers also face capital pressure.
The policies Jiang mentioned include three cuts in interest rates and two cuts in banks' reserve requirement ratios since November 2014.
But with these policies and some infrastructure projects that China is carrying out, steel makers may see slight steel price increases in the second half of this year, Wang said.
China's Ministry of Industry and Information Technology released the latest revised version of the regulation on steel makers on Monday, attaching importance to industry transformation and upgrading, environment protection as well as higher product quality.
Under the new regulation, some medium and small-sized steel makers may have to merge to form stronger companies, Bi Hongbing, an analyst at Sublime, was quoted in the research note as saying.
