Reed Cavendish Wealth Management - China's Steel Industry Faces Challenges

TAIPEI, Taiwan, November 27, 2018 (Newswire.com) - China's steel industry was dealt another blow when the Chinese government issued a smog alert of the second most severe level, forcing Jiangsu, the country's second-largest steel producing province to halve production.

Smog in the Jiangsu province is expected to reach orange level during the period from the 27th to the 30th of November and heavy industry will have to reduce its production capacity by 50 percent.

Plagued by the rapidly escalating trade dispute with the U.S., growth in China's manufacturing sector slowed for the sixth consecutive month last month and analysts at Reed Cavendish Wealth Management say this slowdown may not be temporary.

Decreasing factory prices and a slower pace of sales caused China's industrial profits to slow to a 7 month low last month, reaching just 3.6 percent.

China's steel producers reported losses for the first time since 2015 this month as record high supply and weakening demand squeezed profit margins.

Strong growth is fueled by strong demand and tight supply which is not sustainable in the long term. Reed Cavendish Wealth Management analysts say this cooling of growth could indicate the start of a downward trend.

The trade war between the U.S. and China, which has seen both countries imposing tariffs on each other's imports has hurt manufacturing and caused uncertainty about the prospects for the global economy.

Analysts at Reed Cavendish Wealth Management say China's steel industry will likely continue to suffer if the government does not implement stimulus measures to offset the negative impact of the U.S.-Sino trade dispute and China's air pollution problem.

Source: Reed Cavendish Wealth Management