When America sneezes, the world catches a cold.
This saying from the last century still holds true today, but it could be slightly modified to “when America or China sneezes, the world catches a cold”.
The steel industry is one example of how slowing growth in the Chinese economy can bring havoc not only to mainland mills but also their counterparts worldwide.
Japan’s biggest steelmaker, Nippon Steel & Sumitomo Metal Corp. said Monday it will buy rival Nisshin Steel Co. in an attempt to withstand deteriorating industry conditions triggered by the slowdown in China’s economic growth, The Japan Times reported.
The acquisition is expected to reduce costs and boost competitiveness.
China’s downturn has pushed the global steel industry, including its own producers, into a serious crisis by dragging down the prices of steel products, intensifying global rivalry and crushing profit margins.
Last week, Japan’s No. 2 producer, JFE Holdings Inc., cut its profit forecast for the second time in three months, and South Korea’s top steelmaker, Posco, reported its smallest full-year profit ever, the newspaper said.
At the same time, weighed down by slumping steel prices, overcapacity and a glut in inventory, China’s Angang Steel Co. Ltd. (00347.HK) alerted its investors to a potential loss in 2015 of 4.4 billion yuan (US$670 million).
Maanshan Iron & Steel Co. Ltd. (00323.HK) also filed a profit warning, as the firm expects to book a 4.8 billion yuan full-year loss, compared with a small profit in 2014.
“Low price levels will continue for a while,” Nippon Steel executive vice president Katsuhiko Ota said during a briefing in Tokyo.
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