- Lower input costs help keep finished sales profitable
- Some producers reduce output to ease supply pressure
Mysteel: The number of profitable blast-furnace steel mills in China remained stable overall during the past month, mainly thanks to the softening of major steelmaking raw materials prices, which reduced production costs, the latest Mysteel weekly survey suggests. Unfortunately for mills, however, lacklustre demand caused prices of finished steel to weaken at the same time.
Mysteel’s latest weekly survey showed that as of 12 June, some 58.4% of the 247 sampled BF steel mills under its regular tracking reported making money when selling their finished steel, with the ratio lower by just 0.87 percentage points m-o-m.
Production costs among domestic mills declined over the past month, as prices of raw materials such as iron ore and coke lost ground, reductions that bolstered margins on finished steel sales.
Over 6-12 June, the average cost of making hot metal among the 114 domestic mills monitored by Mysteel was RMB 2,243/tonne (t) ($312/t), excluding 13% VAT, lower by RMB 120/t from one month earlier.
On 12 June, Mysteel’s SEADEX 62% Australian iron ore fines index was assessed at an 8.5-month low of $94.35/dmt CFR Qingdao, lower by $6.5/dmt m-o-m. At the same time, the national composite coke price under Mysteel’s assessment had fallen by RMB 165.5/t m-o-m to RMB 1,174.1/t, including 13% VAT, marking the lowest since September 2016.
Although the traditional summer lull in steel consumption has caused China’s finished product prices to weaken, the impact on steelmakers was partly offset by reduced production costs.
For example, the national average price of HRB400E 20 mm dia rebars, a bellwether of domestic steel market sentiment under Mysteel’s assessment, came in at RMB 3,231/t, including 13% VAT as of 12 June, down by RMB 86/t m-o-m. During the same period, the national average price of Q235 4.75 mm hot-rolled coils (HRCs) under Mysteel’s assessment had slipped by RMB 88/t to RMB 3,242/t, including 13% VAT.
However, mills’ profits have been squeezed, with some makers slowing their production pace to ease market pressure from the supply side, Mysteel Global noted.
Mysteel’s latest weekly survey among the sampled steel mills showed that over 5-11 June, total production of the five major carbon steel items comprising rebar, wire rod, HRC, cold-rolled coil and medium plate touched a three-month low of 8.6 million tonnes (mnt), down by 1.1% on month.
Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.
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