Baoshan sees three year “winter” for Chinese steel

Via Forexlive, from the China Securities Journal (via MNI) – they report on comments from Dai Zhihao, General Manager of Baoshan Iron & Steel Co.:

• It may take three years for the domestic steel sector to “get through the winter”
• He said surplus steel amounts to 200 million tons while steel consumption is estimated around 800 million tons this year
• The capacity utilization ratio of the steel sector is lower than 80% and downstream demand growth remains low
• Warned that the risks in the steel chain have accelerated exposing other issues such as iron ore financing risks and it is unclear when the impact on the steel sector will end

I’ll go on record now and say that if the winter for Chinese steel ends in three years then Australia will be busted. To wipe put 200m million tonnes of steel capacity that quickly require a catastrophic combination of super tight credit and mill bankruptcies. It would be calamitous for iron ore ore and coke prices.

The good news is I don’t think it will happen so fast. More like ten years but even then they’ll be chasing falling demand growth.

Dalian futures are down 3 points and rebar futures are down 6 so far today.