This past weekend, China’s primary steel manufacturing companies released a cautionary statement regarding their profits. In the statement, the manufacturers acknowledged a series of obstacles they expect to encounter in the latter half of the year. They also attribute disappointing demand,, and cost reduction pressures as the primary factors exacerbating these challenges.
Indeed, China’s steel manufacturing industry continues to grapple with these two problems in particular. A recent purchasing managers index indicated a contraction in June, Meanwhile, the Chinese government continues to encourage mergers and production reductions to resolve the persistent issue of oversupply. As a result, the steel industry in China is experiencing a significant shakeout. Moreover, analysts expect these challenges will persist due to slow progress in reducing excess capacity.
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