China's steel industry, the largest in the world, is bleeding cash and every producer is feeling pain, Craigs investment Partners broker Chris Timms says.
China has reduced capacity in its steel industry by 77.8million tonnes, President Xi Jinping said in the United Kingdom, fending off criticism that China's cut-price steel exports had brought the British steel sector to its knees.
''China has reduced capacity in its steel industry by 77.8million tonnes,'' President Xi said.
China makes nearly half the world's 1.6billion tonnes of steel and experts estimate its mills have about 300million tonnes worth of excess steelmaking capacity.
Mr Timms said China's second largest mill by output raised the prospect nationwide production might shrink 20%.
Losses for the industry reached 18billion yuan ($NZ3.3billion) in the first eight months of the year, compared with a profit of 14billion yuan in the previous corresponding period.
Shanghai Baosteel Group chairman Xu Lejiang said output might eventually contract by a fifth, matching the experience seen in the United States and elsewhere, Mr Timms said.
Earlier this year, China said it would aim to cut as much as 80million tonnes of steel capacity in the next three years.
Last year, it eliminated 31.1million tonnes of steel capacity.
According to the latest figures from the World Steel Association, China produced 269million tonnes of iron ore in 2013.
Its iron ore miners had come under pressure this year from record low iron ore prices.
The UK steel industry had seen more than 4000 jobs lost or put at risk this month alone.
Most steelmakers, unions and some politicians have pinned the blame on Chinese steel exports, which they said were sold at below fair value.
China was expected to export a record 100million tonnes of steel this year.
''After decades of expansion, China's steel industry has been thrown into reverse as local demand contracts for the first time in a generation amid slowing economic growth and a property downturn.
''The slowdown has pummelled steel and iron ore prices, prompting Chinese mills to seek increased overseas sales, which are boosting trade tensions,'' Mr Timms said.
Chinese stocks logged their biggest daily fall in more than a month, the first reminder of the summer's panicked selling after weeks of calm, he said.
Fund managers started pulling out of the technology and media sectors which had gained steadily recently, sparking wider selling later in the afternoon.
