Excess capacity threatens the shares of China's steel producers

The market valuation of steel companies in China is affected by expectations of the recovery of steel production and signs of a weakening demand in the country. Steel prices in China this year fell after a 2-year rapid growth. Shares of most steel producers in February and March were faced with a serious correction. Over the past two years, many illegal and polluting industries have been closed down in the PRC against the backdrop of a reform aimed at limiting capacity and emissions to the atmosphere. This had an impact on the supply and caused an increase in the price of raw materials from steel to aluminum, as well as to shares of producers. The Chinese iron and steel sector in the first quarter showed a reduction in profits. In 2018, experts expect the transition of the sector from deficit to surplus.

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