A report by Bloomberg Intelligence, an economic analysis service, warned that China’s steel crisis is paving the way for a wave of bankruptcies and accelerating mergers that the sector needs.
About three-quarters of China’s steel companies suffered losses in the first half of this year, and many of them are likely to file for bankruptcy, said Michelle Leung, a senior analyst at Bloomberg Intelligence.
Leung said that Shenzhen Ba Yi Iron & Steel, Gansu Jiu Steel Group and Anyang Iron & Steel Group are the most vulnerable to bankruptcy in the coming period and may be taken over by rival companies.
Bloomberg Intelligence reported in its report, as reported by the German News Agency, that the expected wave of mergers will help Beijing encourage further concentration of the Chinese steel industry.
The government wants China’s top five steel companies to have 40% of the market and the top 10 to have 60% of the market by 2025.
Leung said the goal was achievable, although China would still be far behind Japan and South Korea in terms of the size of its major steel companies.
China’s ongoing property crisis and slowing economic growth are reshaping the country’s massive steel industry, amid warnings of a crisis worse than those of 2008 and 2015.
The drop in domestic demand has led to a surge in factory exports, sparking a strong trade backlash from countries that say Chinese companies are dumping steel in their markets at below-cost prices.
However, China’s steel exports are unlikely to decline until the end of 2026, as overall production declines and more of China’s trading partners intensify restrictions on Chinese steel imports.
