This report reviews the current trends and market outlook in China’s steel industry. It also highlights the leading players in the sector, among them Baoshan—exporter to 40 countries including the United States, Japan, and Korea—as well as Wuhan, Hebei, and Shanxi Taigang Stainless Steel.

The world’s annual crude steel production expanded at a CAGR of 4.34% between 2005 and 2012. In the first 11 months of 2013, crude steel output in Asia was up by 5.9% y/y to 967.1mn tons. In the same period, China’s steel industry revenue was up 3.3% y/y to RMB 3.35tn, but net profit margin remained low at 0.48%, primarily due to overcapacity. Industry fixed asset investment increased by 25.5% y/y to RMB 516.7bn in 2012. Industry total asset size reached RMB 4.44tn by November 2013.

China has become a net exporter of steel products since 2006, reducing its imports of steel products over the years. Steel sheets and plates was the largest category of steel product imports as well as the exports in 2013.

Key Points:

• The report includes stock performance information and financial highlights for the firms Baoshan Iron & Steel Co. Ltd. (Baosteel), Wuhan Iron & Steel Co. Ltd. (WISCO), Hebei Iron & Steel Co. Ltd. (HBIS), and Shanxi Taigang Stainless Steel Co. Ltd. (TISCO).

• The year 2013 witnessed rapid adoption and migration to e-commerce by steelmakers and steel traders in China. About RMB 10tn of e-commerce sales transactions took place and business-to-business (B2B) made up about 80% of total transactions.

• In October 2013, Chinese government introduced policy to modernize equipment and to shut down mills with capacity on dated and highly polluting equipment. This new policy will drive steel mills to switch from fines to pellets that burn cleaner.

• The situation of oversupply is likely to persist in the near-term due to the slowdown in demand from downstream industries.