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Steel industry on subsidy life-support as China economy slows

By Fayen Wong

SHANGHAI Thu Sep 18, 2014 8:46pm EDT



(Reuters) - Subsidies accounted for four-fifths of the profits reported by Chinese steel companies in the first half of this year, a dramatic increase in reliance on state support that illustrates starkly the industrial weakness that is an increasing drag on the economy.
The headwinds faced by China's massive steel sector - falling profit margins and growing dependence on handouts - are shared by other key industrial and infrastructure-related sectors, including aluminum, cement and coal.

A Reuters analysis of first-half financial statements from 77 listed Chinese steel, aluminum and cement companies revealed a sharp deterioration in profitability.

For the first half of 2013, subsidies accounted for 22 percent of total profits posted by China's listed steel mills, and reached 47 percent in the full year. In the first six months of 2014, the figure jumped to 80 percent, and, even then, the sector's profit margin halved to just 0.3 percent.


http://www.reuters.com/article/2014/09/19/us-china-economy-steel-idUSKBN0HD2LC20140919


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