China is also bearing the brunt of global recession now. In November 2008, the country posted a fall of over 12% in its crude steel production.
Steel production in China, the leading steel producer of the world, continued to shrink during November 2008, pushing the factory output to the lowest level on record, as reported by wallstreetjournal.
Crude steel output dipped to 35.2 Million Metric Tons, 12.4% down from the previous year. Due to this heavy slump in steel production and under performance of many other businesses, the overall industrial output in China grew 5.4% in November 2008 from 8.2% in the month of October 2008. Steel products too fell by 11% during November 2008.
Moreover, the inventories of steel distributors are full of products purchased at high prices; as a result, they are unwilling to risk buying now, leading to a slowdown in demand. Besides, the real demand of steel has steeply plunged due to low market confidence, which, in turn, is limiting the steel production in the country.
Also, the impact of economic slowdown in several countries is inevitably falling on Chinese steel production. In fact, China itself is the world’s largest consumer and producer of steel – a major pillar of its economic strength. But firms are running down inventories, so they are forced to cut down production massively.
In the wake of such sharp fall in production, the Chinese government has decided to boost the industry by giving a stimulus package. The government is also planning to increase spending, reduce taxes and create more jobs to maintain stability in social sector.
According to a Research Analyst at RNCOS, “Steel production in China is plummeting with deepening of global recession. Distributors who bought the products at high prices in July 2008 are under intensive pressure because they are suffering from heavy losses. The situation is really grim and both small and big companies are losing fortunes. But the stimulus package may help the industry to come out of the gloomy situation and induce enough momentum to balance out the macro impact of the global economic slowdown.”
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