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21 May 2014
China Economic Update - NAB
FXStreet (Guatemala) - Gerard Burg, Senior Economist at National Australia Bank suggested that reorganising China’s steel industry faces competing forces – economic and social.
Key Quotes:
“China’s steel industry is the largest in the world and a key consumer of Australian commodity exports. The industry has been suffering in recent times due to excess capacity, weak profitability and its role in the air pollution crisis, prompting Government plans to rationalise the sector and demolish plants. However the steel industry’s importance in local economies means that achieving this goal is easier said than done”.
“The rapid, decentralised and largely uncontrolled expansion of the steel industry has caused a number of problems. From a producer perspective, excess capacity and declining profitability have been major concerns. Profits have fallen steadily since 2011, as falling prices began to eat into margins”.
“China’s largest steel producing province is Hebei, which circles Beijing. Beijing’s pollution problems have been high profile over the past year - with around one-third of Beijing’s air pollution the result of activities in surrounding provinces – such as steel production in Hebei (along with coal fired electricity generation and cement)”.
“A major challenge in addressing the problems caused by excess steel production and capacity is the critical role of steel in both employment and in the provision of social services to their communities. Steel is the major employer in many industrial cities and rising unemployment could threaten social stability – one of the key concerns of the central government”.
Key Quotes:
“China’s steel industry is the largest in the world and a key consumer of Australian commodity exports. The industry has been suffering in recent times due to excess capacity, weak profitability and its role in the air pollution crisis, prompting Government plans to rationalise the sector and demolish plants. However the steel industry’s importance in local economies means that achieving this goal is easier said than done”.
“The rapid, decentralised and largely uncontrolled expansion of the steel industry has caused a number of problems. From a producer perspective, excess capacity and declining profitability have been major concerns. Profits have fallen steadily since 2011, as falling prices began to eat into margins”.
“China’s largest steel producing province is Hebei, which circles Beijing. Beijing’s pollution problems have been high profile over the past year - with around one-third of Beijing’s air pollution the result of activities in surrounding provinces – such as steel production in Hebei (along with coal fired electricity generation and cement)”.
“A major challenge in addressing the problems caused by excess steel production and capacity is the critical role of steel in both employment and in the provision of social services to their communities. Steel is the major employer in many industrial cities and rising unemployment could threaten social stability – one of the key concerns of the central government”.