China’s massive steel industry is facing a wave of bankruptcies

CHINA’S steel crisis is setting the stage for a wave of bankruptcies and speeding a much-needed consolidation of the industry, according to Bloomberg Intelligence (BI).

Almost three-quarters of the country’s steelmakers suffered losses in the first half and bankruptcy is likely for many of them, Michelle Leung, a senior analyst at BI, said. Xinjiang Ba Yi Iron & Steel, Gansu Jiu Steel Group and Anyang Iron & Steel Group face the highest risk, and could be potential acquisition targets, she said.

The wave of consolidation will help Beijing encourage more concentration in its steel industry, BI said. The government wants the top five companies to control 40 per cent of the market by 2025 and the top 10 to account for 60 per cent. These targets look “achievable”, although China will still be well behind South Korea and Japan in this respect, Leung said.

China’s persistent property crisis and flagging economic growth are reshaping the country’s massive steel industry, with the head of its biggest producer, China Baowu Steel Group, warning last month of a crisis worse than in 2008 and 2015. A slump in domestic demand has meant mills have increased exports, spurring a trade backlash from countries who say the metal is being dumped at below cost.

However, China’s steel exports are not likely to decline until the end of 2026, as total production falls and more trading partners step up restrictions, according to BI. BLOOMBERG