Profits for Chinese steel companies fell 72% in 2022 due to problems in the sector due to the drop in demand from a crisis real estate sector and the increase the cost of coking coal, a key fuel for furnaces, the economic news portal Caixin reports today.
Companies in the sector had recorded record profits in 2021, when they reached 352,400 million yuan (51,535 million dollars, 48,043 million euros), but in 2022 this figure fell to 98,200 million yuan ($14,362 million, 13,389 million euros), according to data from the employers’ association CISA.
The turnover of steel companies had fallen by only 6.35% over one year, but their ability to generate profits was reduced by the 13.55% drop in the average price of steel and the rise in 24.91% of that of coking coal, although the fall in the cost of importing iron ore (-24%) eased these pressures.
The struggling real estate sector accounts for nearly a third of steel demand in China, where residential sales by area fell 24.3% year-on-year in 2022 while new construction fell nearly 40% .
Added to this, according to Caixin, is the slowdown in the construction of infrastructure projects such as high-speed railways, metros or highways, which means less steel consumption.