China’s No. 3 Steel Mill Offers Hopeful Take as Sector Struggles

China’s third-biggest steelmaker injected a more optimistic tone into an otherwise gloomy earnings season for the beleaguered industry, saying that growth in steel-intensive manufacturing would support prices.
“The supply-demand balance and corporate profits are expected to improve,” Hesteel Co. Ltd., the listed unit of state-owned HBIS Group Co. Ltd., said after posting a 19% drop in first-half net income. “Demand for steel in manufacturing will steadily increase, and steel prices will still have significant resilience.”
China’s steel industry — the world’s largest by a considerable margin — has been engulfed by a downturn as demand and prices slump, squeezing mills’ margins and triggering a wave of exports. Earlier this month, China Baowu Steel Group Corp., the largest producer, said that the challenges facing the sector were more severe than major traumas seen in 2008 and 2015.
Steelmakers — and the world’s iron ore miners that supply them — are grappling with the end of China’s long era of booming construction as a nationwide property crisis drags on. But many areas of local steel demand are still racking up growth, helping to soften the impact of the downturn — and to hold off a more precipitous decline in total steel consumption.
Iron ore futures in Singapore are heading for their biggest weekly gain since April on some tentative signs that the steel market is recovering from its summer slump. They’re still down by more than a quarter this year. 
Decent prospects for steel markets besides home-building has been a recurring theme during a jittery reporting season, including from Hesteel. State programs to encourage upgrades of factory equipment and trade-ins of consumer goods, as well as spending on power infrastructure, are boosting demand, it said, while also flagging rising usage in shipbuilding and autos.
Still, many industry figures say overall demand in China has likely entered a period of long-term decline, and other smaller steelmakers reporting on Thursday sounded more cautious.
Among them, Maanshan Iron & Steel Co. Ltd. said excess supply would be “difficult to effectively alleviate”. 
And Shandong Iron & Steel Co. Ltd., which reported a deeper a loss in the first half, warned “total demand for steel in downstream industries will continue to decline, and the demand structure will continue to diversify.” 
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