China’s annual average price of copper, for example, soared 40.5% on year to Yuan 68,490/tonne ($10,767/t) for 2021, up the most among the four base metals of copper, aluminum, lead, and zinc, mainly on the support of robust demand while limited supply, and the market appears still promising, as copper inventories in China’s commercial warehouses slumped 50% on year to about 74,000 tonnes by late December or a relatively low level in recent few years, Mysteel Global noted from a MIIT post.
China’s aluminum price also surged rather substantially by 33.5% on year to Yuan 18,946/t as the yearly average for 2021.
As for the ferrous sector, China’s coke jumped by over 50% on year to around Yuan 2,845-2,927/t for different sizes as the average for 2021, on the backup of rising cost of coking coal and supply tightness, as its nationwide coke output fell 2.2% on year to about 464 million tonnes, MIIT shared.
For 2021, China’s composite steel pricing index soared by 36.46 basis points on year to 142.03 on average, mainly due to rising costs of raw materials such as coking coal and iron ore, but it seemed that domestic steel producers had successfully transferred the added cost to their end-users, as the country’s major steel producers, most being medium- and large-sized, achieved a historically-high profit at Yuan 352.4 billion, or up 59.7%, though their profitability averaged 5.08%, up 0.85 percentage point on year.
Downstream industries, though, did not benefit as much from the economic rescue and stabilizing efforts, and China’s machinery manufacturers, for example, saw their business revenue up 14% on year but their gross profit rose but by just 7.6% on year to Yuan 1.57 trillion, probably due to the more expensive raw materials, Mysteel Global noted.
China’s shipbuilding industry was another example among the downstream industries that their financial situation had not improved much, as the domestic shipbuilders confirmed the abundancy in backlogs with the volume totalling 95.84 million deadweight tonnes by the end of 2021, or up 34.8% on year with 88.2% from overseas orders, but their profitability dropped on rising costs of production materials last year, MIIT pointed out, without specifying the amount or the on-year change.
Last year, Chinese shipbuilders’ capacity utilization index gained 64 basis points on year to 742, or having exceeded 700, the mark for a normal range, for the first year since 2012, MIIT highlighted, and this was despite the fact that the sector is highly concentrated with the top 10 builders accounting for nearly 70% of the country’s total completed vessels, new orders, and backlogs.
Despite of the mixed pictures in the various industrial sectors, China’s Producer Price Index went up 8.1% on year while its Consumer Price Index (CPI) gained but marginally by 0.9% on year, both for 2021 and at rather low levels, suggesting that the country is free from the concern on inflation for now.
However, if raw materials prices continue to persist high for 2022, it is hard to predict whether the downstream industries especially those that produce consumer goods will be forced to pass on the added costs to consumers and result in a high on-year rise in CPI, according to some market sources, as many developed economies such as the U.S. have already been struggling with high inflation after 2021 on rising prices of consumer goods and energy, for example.
Written by Hongmei Li, li.hongmei@mysteel.com
This article has been published under an exchange agreement between MySteel Global and SteelMint.
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