It is reported that the Chinese steel sector is experiencing the worst time since 1998, with upgrading staff and salary cuts. Meanwhile, steel mills are also worried about digesting mounting inventories.
Mr Zen Jiesheng Mysteel analyst said that "Leading state mills include Baosteel, Angang and Wuhan Steel had cut salary for employees and medium and small private mills have expanded their staff cuts degree, Liquidity strains is the root cause behind the move, while huge inventories also occupy or even consume mills' capital, which is unlikely to be digested in short period."
An insider of Wuhan Steel said that many mills have increased the settlement of acceptance bill and commercial bill etc to relieve the liquidity pressure. "The moves have high risks, and are likely to cause capital black hole in economic downturn." Wuhan Steel aims to cut costs by CNY 2.5 billion at least in the last quarter since its Q3 net profit has fall CNY 438 million QoQ to CNY 1.57 billion. To achieve the target, the steelmaker has cut salary by 15% for common employees and 20% to 50% for management levels.
Insiders of Angang unveiled that salary for iron making plants workers has been cut by 35%, with that for affiliated plants by 50%. Insiders of Baosteel also said that total salary amount has been reduced by 10%. Shougang also halved the bonus for their employees.
As China's top private mill, Shagang is losing CNY 500 to CNY 800 for per tonne steel sale or CNY 0.2 billion per day. And insiders said that the production in steelmaking plant has been cut, with dull sales for its rebar and sales returns for slabs.
Official from Pangang New Steel & Vanadium Company said that Pangang has not reduced salary so far, but it will come sooner or later if the deficit continues. Compared with leading steel mills, small private steelmakers have gone further in salary and staff cuts moves.
A Hebei based official said that high See Steel Group, the biggest privately held steel producer in Shanxi, has reduced 2,000 employees, representing 30% of its total. Most of private mills have laid off some workers, mostly in forms of leave. High inventories have further devoured steel mills' profit and exaggerated the liquidity strains, resulting in many closures for medium and small steel mills due to the below costs steel prices at the moment.
(Sourced from MySteel.net)
