China: Blast furnace mills’ profit margins fall in Apr on higher costs

The profit margins earned by 91 Chinese blast-furnace steel mills had been eroded further by rising production costs in April, as Mysteel’s latest monthly survey suggested.

Last month, the average gross loss on rebar sales among the sampled mills deepened by Yuan 60/tonne ($9/t) on month to Yuan 154/t, and their profit margins on selling hot-rolled coil (HRC) also fell to the negative zone, posting a loss of Yuan 70/t against the profits of Yuan 115/t in March.

Although the surveyed mills still managed to gain some profits on medium plate sales, their average profit had been squeezed to Yuan 18/t in April, sliding by Yuan 145/t from the previous month.

The further decrease in mills’ profits was mainly blamed to the continuous rally in their production costs with high prices of major steelmaking raw materials including iron ore and coke, Mysteel Global learned from the survey.

For April, the costs for making molten iron among the 91 surveyed mills averaged Yuan 3,677/t excluding the 13% VAT, up for the fourth consecutive month by another Yuan 57/t or 1.6% on month.

Last month, Mysteel SEADEX 62% Australian Fines came in at $151/dmt CFR Qingdao on average, edging up $1/dmt from March, while the price of class 2 metallurgical coke in North China witnessed a substantial increase of Yuan 402/t on month to average Yuan 3,829/t.

However, Chinese steel prices were largely constrained by lackluster demand in April, though the prices increased somewhat on support of higher production costs, Mysteel Global noted.

For example, the average national price of HRB400E 20mm dia rebar was assessed by Mysteel at Yuan 5,107/t including the 13% in April, up Yuan 134/t on month.

Last month, the daily trading volume of construction steel comprising rebar, wire rod and bar-in-coil among 237 Chinese traders under Mysteel’s tracking averaged 170,550 tonnes/day, higher by 1.7% on month.

But the volume was still much lower than the threshold of over 200,000 t/d in April, a traditional peak season for steel consumption, due to the ongoing impact of COVID-19 outbreaks in many regions across China.

This article has been published under an article exchange agreement between Mysteel Global and SteelMint.