(Bloomberg) -- Losses at Chinese steel mills deepened again last month, making the case for further production cuts to rescue margins in the embattled sector.
Accumulated losses in the world’s biggest steel industry swelled to 2.8 billion yuan ($393 million) over the first seven months of the year, according to data for July from the statistics bureau on Tuesday. Losses had eased in the previous three months, with the industry approaching breakeven in June.
Commodities producers have been among China’s least profitable firms this year, as state-owned enterprises rooted in the old economy bear the brunt of a sluggish economy. Steelmakers and crude oil processors have been the worst of the lot, and the only major sectors to have failed to accumulate profits over the period.
Chinese steelmakers are being forced to slash output as the industry’s downturn worsens. The crisis-wracked property sector remains the epicenter of the market’s woes, prompting top producer China Baowu Steel Group Corp. to sound the alarm earlier this month over the impact on profits.
The government’s response to the crisis has been to abruptly suspend its system for approving new steel plants. Exports, a key channel for soaking up China’s surplus, are also threatened by burgeoning trade measures, with Canada the latest country to impose tariffs on Monday.
Oil refining is another pillar of China’s old economy that’s struggling with too much capacity relative to demand. Accumulated losses worsened to nearly 19 billion yuan in July. Gasoline consumption is facing long-term decline due to the electrification of China’s car fleet, while diesel demand is faltering because of the slowdown in construction.
On the Wire
PetroChina Co. posted record earnings for the first half of the year as high drilling output and strong oil prices helped it weather weakening fuel demand in China.
BHP Group Ltd., the world’s biggest miner, posted a full-year profit broadly in line with expectations, as revenue from iron ore and copper increased despite a deteriorating Chinese demand outlook.
BYD Co. said the timing of its lithium project in Chile remains up in the air as the Chinese electric vehicle juggernaut continues to negotiate with authorities in the South American nation.
Canada will impose new tariffs on Chinese-made electric vehicles, aluminum and steel, lining up behind western allies and taking steps to protect domestic manufacturers.
This Week’s Diary
(All times Beijing unless noted.)
Tuesday, Aug. 27:
- China’s industrial profits for July, 09:30
- Qingdao Multinationals Summit, day 1
- EARNINGS: Baosteel, Tongling Metals, Anhui Conch, China Oilfield, China Resources Power, Yunnan Energy, TCL Zhonghuan
Wednesday, Aug. 28:
- CCTD’s weekly online briefing on Chinese coal, 15:00
- PetroChina earnings briefing in HK, 16:00
- Qingdao Multinationals Summit, day 2
- EARNINGS: Cnooc, BYD, Gotion, Ganfeng Lithium, CNGR, Chalco, Jiangxi Copper
Thursday, Aug. 29:
- Cnooc earnings briefing in HK, 16:15
- Qingdao Multinationals Summit, day 3
- EARNINGS: Longi, Tongwei, Windey, GCL-Poly, Hesteel, Shandong Steel, Maanshan Steel, GEM, Ningbo Shanshan, China MCC, Cosco
Friday, Aug. 30
- China weekly iron ore port stockpiles
- CMOC online earnings briefing, 10:00
- Shanghai exchange weekly commodities inventory, ~15:00
- EARNINGS: Tianqi, Jinko, JA Solar, Ming Yang, Yangtze Power, Three Gorges, Shenhua, Angang Steel, Citic Ltd.
Saturday, Aug. 31
- China’s official PMIs for August, 09:30
Sunday, Sept. 1
- China International Steel Congress in Shanghai, (through Sept. 2)
--With assistance from Winnie Zhu.
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