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In the first half of the year, according to the data released by the Ministry of Industry and Information Technology, new crude steel production reached 3.45 times the annual backward production capacity set for the steel industry. This indicates that very few companies actively reduced their output. A significant portion of this new production—60%—came from key large and medium-sized steel enterprises, highlighting the dominance of these firms in the sector.
The national crude steel output between January and June totaled 390 million tons, marking a 7.4% year-on-year increase, with the growth rate rising by 5.6 percentage points compared to the same period last year. The average daily output during this period was 2.154 million tons, translating to an annual capacity of 786 million tons. February saw the highest daily output at 2.208 million tons.
Regionally, Hebei and Jiangsu provinces experienced notable growth, with crude steel output increasing by 6.8% and 13.2%, respectively. Together, these two provinces accounted for 42.4% of the country's total new output. Other provinces, such as Shanxi, Liaoning, Henan, and Yunnan, also saw increases of over 1 million tons in production.
From a company perspective, key large and medium-sized iron and steel enterprises reported a 5.5% year-on-year increase in crude steel output. While this is slightly below the national average, it still shows that these enterprises are driving much of the growth.
Luo Baihui, chief analyst at Jinmo Steel Network, noted that despite efforts to eliminate outdated production capacity, the steel industry continues to face challenges. The expansion of production capacity remains a concern, and high debt levels further complicate the situation. From January to May, the total assets of large and medium-sized steel enterprises reached 4.3 trillion yuan, while liabilities hit 3 trillion yuan. The asset-liability ratio stood at 69.4%, up 1.4 percentage points from the previous year. Financing difficulties and rising costs remain major hurdles for many steel companies.
Environmental pressures are also increasing, as the steel industry is one of the main contributors to air pollution. New emission standards have tightened limits on particulate matter and sulfur dioxide, leading to higher compliance costs for many companies. Some urban steel mills are facing pressure to relocate due to environmental concerns.
Market conditions have worsened, with supply outpacing demand. Despite falling steel prices and operational difficulties, many companies are reluctant to cut production. Firms are concerned about losing market share, avoiding bank loan risks, and maintaining local economic growth. As a result, the industry remains oversupplied, and the steel market continues to struggle.
Profitability has also been affected. In the first five months, the steel industry recorded a profit of 62.1 billion yuan, up 23.4% year-on-year. However, this growth comes amid declining prices and increased production. Steel prices fell sharply in June, with the domestic composite index averaging 99.15, down 4.45 points from the previous month and 16.72 points year-on-year. Prices for various steel products dropped significantly, reflecting weak demand.
In contrast, the non-ferrous metals sector showed mixed results. Output of ten non-ferrous metals rose by 10%, but some commodities like zinc saw slower growth. Prices for copper, aluminum, lead, and zinc rebounded slightly in June, but overall profits in the non-ferrous industry declined by 7.1% year-on-year.
Government reports also highlighted declining tax revenues, partly due to slower economic growth. Corporate income tax for steel, coal, and non-ferrous metal industries dropped significantly, reflecting weakened profitability. Meanwhile, the central government has emphasized the need to address overcapacity and promote more efficient production methods.
Fiscal and tax authorities have announced plans to reform the tax system, imposing stricter regulations on high-pollution and energy-intensive industries. Resource tax reforms are expected to increase the tax burden on certain sectors, encouraging sustainable development.
Economists suggest that infrastructure and real estate activities remain stable, supporting continued steel demand. However, the long-term outlook for the steel industry remains uncertain, with challenges in reducing overcapacity, managing debt, and adapting to stricter environmental regulations.