(This story appears here courtesy our content partner MySteel Global)
China’s 91 blast-furnace mills under Mysteel’s monthly survey have reported that the gross profits they earned on the three major steel products all shrank last month, with their average margin on rebar plunging the deepest, tumbling by Yuan 163/tonne ($23.3/t) on month to just Yuan 92/t for June.
Survey respondents chiefly blamed higher production costs for procuring raw materials against lower rebar prices amid sliding wet-season steel demand.
Mysteel calculated that the average SEADEX iron ore price for 62% Fe Australian Fines in June gained by another $10.5/dmt on month to $102.4/dmt CFR Qingdao. At the same time, the metallurgical coke price in North China also moved up further by Yuan 135/t on month to Yuan 1,842/t including 13% VAT.
On the other hand, though the profits of hot-rolled coil and medium plate, the other two monitored items in the survey, also declined last month, the margin was much smaller, with the former down Yuan 15/t on month to average Yuan 53/t and the latter down Yuan 50/t on month to Yuan 75/t, according to the survey.
Commenting on the difference in the size of the margin contractions among the three, a Beijing-based ferrous analyst explained that rebar prices declined further than the other two last month as the wet season rains usually have a larger impact on long steel demand than on flat steel. The incessant rains usually cause building contractors to halt work on construction sites and construction is the country’s largest long steel consumer, Mysteel Global notes.
Last month, Mysteel’s data showed that sales of rebar, wire rod and bar-in-coil among the 237 domestic traders Mysteel tracks regularly dived by 12.4% on month to 213,568 tonnes/day. Accordingly, the national price of HRB 400 20mm dia rebar Mysteel assesses dropped by Yuan 30/t on month to Yuan 3,786/t including 13% VAT as of June 30.
The rains have yet to undermine flats demand however, commented an East China-based flat steel producer. “Recently, we saw rising orders for HRC from our customers which encouraged us to lift our HRC list prices by Yuan 30/t,” he added.
And in marked contrast to the lower rebar price, the country’s Q235 4.75mm HRC price jumped by Yuan 114/t on month to Yuan 3,673/t including 13% VAT as of June 30, according to Mysteel’s data.
The main cause for the decline in profit margins on HRC and plates was the still high production costs the mills were coping with last month, Mysteel’s survey showed. Last month, the cost of making HRC among the sampled BF mills moved up by Yuan 111/t on month to Yuan 3,621/t while that for making medium plate also increased Yuan 100/t on month to Yuan 3,700/t respectively, the survey showed.
(Written by Venus Wang, firstname.lastname@example.org: Edited by Russ McCulloch, email@example.com)