- Production costs fall as raw material tags drop
- Iron ore fines, met coke prices decline m-o-m
Mysteel Global: The profit margins on finished steel sales earned by Chinese blast-furnace (BF) steel mills improved in March, mainly thanks to the significant fall in their production costs with the lower prices of major steelmaking raw materials, according to Mysteel’s latest monthly survey of the 91 BF mills under its tracking.
During March, the sampled steel mills registered average profits of RMB 51/tonne (t) ($7/t) on rebar sales as against a loss of RMB 25/t over the previous month.
The sampled steelmakers also achieved better profits on flat steel sales last month, with the average profit on sales of hot-rolled coils (HRCs) rising by RMB 95/t m-o-m to RMB 133/t, the findings showed. Profits on sales of medium plates posted a sharper m-o-m rise of RMB 130/t to average RMB 260/t.
The better profitability of domestic BF steel producers was mainly attributed to the continuous fall in their production costs, Mysteel Global learnt, as prices of major steelmaking raw materials, including iron ore and metallurgical coke, declined by varying degrees in March.
Last month, the average cost of making hot metal among the 91 surveyed mills was assessed by Mysteel at RMB 2,477/t, excluding the 13% VAT, representing an m-o-m fall of RMB 81/t or 3.2%.
During March, Mysteel’s SEADEX 62% Australian fines index for iron ore averaged $102/dmt CFR Qingdao, slipping by $4/dmt from the prior month. At the same time, prices of second-grade metallurgical coke in North China reached RMB 1,316/t on average, falling by RMB 114/t m-o-m.
Healthy profit margins and expectations for a recovery in steel demand in March led some domestic steel mills to ramp up production, causing their finished steel output to increase gradually.
Mysteel’s other survey showed that over 20-26 March, total production of the five major steel items, comprising rebars, wire rods, HRCs, cold-rolled coils (CRCs), and medium plates came in at 8.7 million tonnes (mnt), higher by 3.2% m-o-m.
Steel inventories held by Chinese traders declined steadily in March, thanks to the replenishment of end-users, with the total tonnage of the five major steel items at traders’ warehouses in the 132 cities under Mysteel’s tracking reaching 19.9 mnt as of 27 March, lower by 8.3% from one month earlier.
However, China’s finished steel prices weakened overall last month, as the recovery in steel demand failed to meet market expectations, Mysteel Global noted.
For example, the national price of HRB400E 20mm dia rebar, a bellwether of domestic steel market sentiment, was assessed by Mysteel at RMB 3,342/t, including 13% VAT, as of 31 March, down by RMB 99/t from the end of February. During the same period, the national average price of Q235 4.75 mm HRC under Mysteel’s assessment slipped by RMB 41/t to RMB 3,404/t, including the 13% VAT.
Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.
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