China’s private steel mills on a profit roll as prices rebound
But buoyant returns could complicate Beijing’s push to cut excess capacity, analyst says
Profits nearly tripled at private steel mills in the industry’s mainland heartland in the first seven months, state-run Xinhua reported on Sunday.
Analysts said the rising profitability of steel plants in Hebei province, which has more steel capacity than Japan and the United States combined, could complicate the central government’s efforts to shrink the industry further.
The central government is pushing the industry to cut excess capacity but while state-owned mills might comply with demands to trim output, plants backed by local governments and private businesses will keep production lines going if there are profits to make.
Private steel mills in the province reported 17.1 billion yuan (HK$19.8 billion) in combined profits over the seven months, up 283 per cent from a year earlier, Xinhua reported, quoting data from the provincial steel industry association.
Of the 78 steel mills covered by the association’s survey, 63 were profitable during the period, compared with more than 50 over the same time in 2015.
Hebei’s most profitable producer was Delong Steel, which made 347 yuan in profit for every tonne of steel produced, Xinhua reported.
