China's steel sector struggling with weak demand, pandemic curbs disrupting construction: Fitch

By Ovunc Kutlu

ANKARA (AA) – China’s steel industry continues to face challenges due to weak demand from its property sector, according to global agency Fitch Ratings.

The country’s steel sector is also struggling due to pandemic-related restrictions that continue to disrupt construction activity, the agency said in a statement on Sunday.

Fitch, however, said it does not expect further deterioration in the steel sector’s profitability due to production cuts in response to the weak demand.

“High raw material prices should support average selling prices, albeit at low levels,” it added.

Steel consumption, measured by total production minus net exports, was down 6% on an annual basis to around 570 million tons in the first seven months of this year, Fitch said.

“This was caused by weak downstream demand, particularly from the property sector, coupled with the traditional summer off-season for construction,” read the statement.

“The pandemic-related lockdowns in various cities may stifle the resumption of construction activity nationwide, posing risks to a recovery in steel demand for the full year.”

The agency said it does not expect a strong recovery in China’s steel demand, despite a 9.1% year-on-year increase in infrastructure investment during the month of July.