China's Steel and Oil Industries Face Losses Exceeding $9.5 Billion! Traditional Economy on the Brink of Collapse

Between January and September this year, China's steel industry accumulated losses of a staggering $5 billion. At the same time, the oil industry's losses also widened, reaching $4.5 billion. The figures reflect the pressure on China's traditional commodity producers, particularly steelmakers and crude oil processors, as losses continue to mount amid the country's slowing economic growth.

Cumulative losses in the world's largest steel industry reached 34 billion yuan ($5 billion) in the first nine months of this year, according to the latest data released by China's National Bureau of Statistics on Sunday. At the same time, refining losses widened further to Rmb32bn. More worryingly, profits at broader industrial firms fell at a faster pace than in the previous month.

Affected by China's prolonged property crisis, steelmakers have had to cut production to protect their already battered profit margins. Bankruptcy looms. At the same time, refiners are also cutting production as China's rapid adoption of electric vehicles exacerbates weak demand for the fuel. This week, China will wrap up its third-quarter earnings season, when the country's biggest steelmakers and oil and gas companies report.

Steel stocks rose sharply on Monday after China's main industry association said it would come up with policies to encourage consolidation among its members and urged companies to avoid cutthroat competition. The proposal of this policy may have a positive impact on the steel industry.

The Chinese government has recently taken a series of measures to stimulate the economy, and their impact on demand for raw materials is being closely watched. Goldman Sachs said oil consumption was likely to get a modest boost, however, the focus on clearing China's housing stock would limit the impact on the steel market.

The steel and oil refining sectors are the only two of the major industries tracked by the National Bureau of Statistics that have not accumulated profits so far this year. But other commodity producers are also feeling the pinch from a tepid economy and overcapacity problems.

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Bloomberg Intelligence said optimism about Chinese copper prices prevailed at the Shanghai Metals Market conference in Qinghai this month, with smelters set to expand in 2024-25.

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