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China's State Owned Enterprises Are Adding To The Collapse In Iron Ore

•, Mamta Badkar
 As Chinese iron ore inventory builds up, much attention has been devoted to the slowdown in the domestic economy.

What's under-reported is the fact that Chinese state-owned enterprises that dominate the steel sector are unlikely to cut production, even as demand for steel weakens.

Goldman Sachs' recent commodities tour in China showed that players in the Chinese steel industry see steel demand weakening and don't expect a government stimulus until well after the leadership transition, possibly as late as March 2013.

But steelmakers don't expect to cut steel production according to Goldman analyst Marcelo Aguiar. While this seems especially peculiar for state-owned enterprises that are taking the biggest hit in terms of profits, there is a pretty strong incentive for them not to. Employment.

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