- Chinese steel mills face persistent losses on rebar sales
- Rising material costs offset gains from improved steel demand
Mysteel: China’s blast-furnace (BF) steel mills continued to lose money on rebar sales in March, as their production costs increased with the rise in prices of major steelmaking raw materials, according to Mysteel’s latest monthly survey.
Last month, the average loss on rebar sales among the sampled steelmakers was reported at Yuan 33/tonne ($4.8/t), deepening slightly by Yuan 3/t from the previous month, while their loss on sales of hot-rolled coil (HRC) averaged Yuan 17/t, easing from last month’s average Yuan 28/t loss.
During March too, the sampled BF steelmakers gained some profits on sales of medium plate, with the average profit reaching Yuan 3/t, in sharp contrast to the average loss of Yuan 40/t in February, the survey results showed.
Chinese BF mills’ margins on finished steel sales (Unit: Yuan/t)
Prices of major steelmaking raw materials such as iron ore increased significantly, offsetting the slight decrease in prices of metallurgical coke and lifting the production costs of domestic steel mills.
By the end of March, the Mysteel SEADEX 62% Australian Fines iron ore index had jumped by $7/dmt from end-February to average $108/dmt CFR Qingdao, while the average price of second-grade metallurgical coke in North China was assessed by Mysteel at Yuan 1,390/t, down by Yuan 37/t from the prior month.
During last month, the average production cost for making rebar among the sampled BF steelmakers increased by Yuan 36/t on month to Yuan 3,119/t including the 13% VAT, and those for making HRC and medium plate reached Yuan 3,271/t and Yuan 3,305/t including the VAT, growing by Yuan 33/t and Yuan 27/t respectively on month, according to the survey.
China’s finished steel prices recovered in March due to improved demand from end-users preparing for higher steel consumption in spring. Meanwhile, higher energy costs from the escalating conflict in the Middle East also boosted sentiment in the domestic steel market. These factors have eased the mills’ cost pressure to some extent, Mysteel Global noted.
For example, the daily trading volume of construction steel comprising rebar, wire rod and bar-in-coil among the 237 trading houses nationwide under Mysteel’s tracking averaged 86,603 tonnes/day in March, much higher than the average of 34,882 t/d over February 2-6. Mysteel suspended the release of construction steel trading volume data for February 9-28 due to subdued spot market activity during and after the Chinese New Year period.
During March, the national price of HRB400E 20mm dia rebar averaged Yuan 3,325/t including the 13% VAT, rising by Yuan 20/t from the previous month, while the national average price of Q235 4.75mm HRC increased by Yuan 23/t on month to reach Yuan 3,302/t ncluding the 13% VAT, according to Mysteel’s assessment.
Although Chinese steel mills lifted production in March, their finished steel output was still lower than for the same period last year given the slower-than-expected recovery in demand.
Mysteel’s other survey showed that by the end of March, total production of the five major steel items comprising rebar, wire rod, hot-rolled coil (HRC), cold-rolled coil and medium plate among steelmakers under its tracking reached 8.4 million tonnes, lower by 3.4% compared with one year earlier.
Note: This article has been written in accordance with a content exchange agreement between Mysteel and BigMint.
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