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Steel Price Recovery Made Chinese Steel Companies Profitable in 2016: NDRC

By Leia Toovey , 2017-02-05 08:50:24

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According to the National Development and Reform Commission (NDRC), Chinese steel producers were able to post profits last year after the country’s capacity reductions boosted steel prices.
The profits of 373 steel companies are expected to reach 35 billion yuan ($5.1 billion) in 2016, even as the prices for some inputs soared. In 2015, these steel companies lost 84.7 billion yuan.
China moved in 2016 to cut steel capacity, and as of October 2016 had achieved its goal of reducing capacity by 45 million tons. From 2016 to 2020, steel capacity will be cut by 100 to 150 million tons. At the same time that China cracked down on steel production, it also pushed coal miners to reduce output and soaring metallurgical coal prices impacted steel companies’ margins. There was the sentiment that China would reduce regulations as the rise in metallurgical coal prices were protested by domestic steel companies. However; the fact that these steel companies were profitable gives the government support to push forward with more cuts.
In company news, higher steel prices benefited US Steel Corp. in the fourth quarter, and the company lost $105 million, or 61 cents per share, a vast improvement from the loss of $1.1 billion, in the year-ago quarter. Looking forward, the outlook is cautiously optimistic. “We are starting 2017 with much better market conditions than we faced at the beginning of 2016; however, market conditions continue to be volatile. We must remain focused on improving the things that we can control,” said the company’s CEO Mario Longhi.
One of the things Longhi is optimistic about is the Trump administration’s stance toward manufacturing and using American made materials. United States Steel and other American manufacturers are “absolutely” prepared to produce steel for the pipelines President Donald Trump want to build, Longhi told CNBC on Wednesday.
Source: http://www.economiccalendar.com/

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