China's Steel Crisis: A Looming Wave of Bankruptcies and Mergers
China's steel industry is facing a critical juncture as a recent report from Bloomberg Intelligence highlights a looming crisis that could result in numerous bankruptcies and significant mergers within the sector. Approximately 75% of steel companies in China reported losses during the first half of the year, prompting fears that many may soon file for bankruptcy. Senior analyst Michelle Leung identifies Shenzhen Ba Yi Iron & Steel, Gansu Jiu Steel Group, and Anyang Iron & Steel Group as the most vulnerable to insolvency, potentially leading to their acquisition by more stable rivals.
The report indicates that this anticipated wave of mergers aligns with the Chinese government's strategy to consolidate the steel industry. The goal is for the top five steel companies to control 40% of the market and the top ten to hold 60% by 2025. While this consolidation is seen as a necessary step for the industry, Leung warns that even with these changes, China's major steel companies will still lag behind their counterparts in Japan and South Korea.
The ongoing property crisis and slowing economic growth in China are reshaping the steel landscape, raising concerns of a crisis that may surpass those experienced in 2008 and 2015. The decline in domestic demand has led to increased exports, which has drawn criticism from other nations accusing Chinese firms of dumping steel at below-market prices. However, experts predict that China's steel exports will continue to rise until the end of 2026, despite increasing restrictions from trading partners.
