MySteel Global – Rebar profits lower than HRC for China’s blast furnace steel mills in July

China’s 91 blast-furnace (BF) mills under Mysteel’s monthly survey posted their rebar gross margins down for the second month to Yuan 68/t for July, while the average margin of hot-rolled coil (HRC) reversed up to Yuan 150/t, mainly as the HRC price strengthened further in July on better demand while lower output.

China’s national HRC price surpassed that of rebar on June 23, and as of July 31, the price of the Q235 4.75mm HRC registered Yuan 3,918/t, up Yuan 131/t on month, while that of the HRB 400 20mm dia rebar was assessed at Yuan 3,805/t, up Yuan 49/t on month but still below the HRC price, Mysteel’s data showed.

As a result, the 91 mills’ rebar gross margin fell by another Yuan 24/tonne ($3.4/t) on month in July while HRC up Yuan 97/t on month, even though most of the BF mills in China saw their steelmaking cost up by about Yuan 50/t on month with higher iron ore prices in particular, according to Mysteel’s latest monthly survey.

“Compared to longs, flat steel demand in wet season performed rather stable, and more surprisingly, HRC end-users including automobile manufacturers, home appliances and excavators producers, have been all operating at high levels recently,” commented a Shanghai-based market insider.

China’s heavy-duty truck sales in the domestic market, for example, surged by 89% on year to about 140,000 units for July, mainly due to the firm demand from the infrastructure construction sector, as reported.

In contrast, China’s rebar demand was distressed by the incessant rains in South and East China over June-July, and rebar prices, as a result, were severely challenged by the rising stocks and the remaining high output, Mysteel Global understood.

By the end of July, rebar stocks in the commercial warehouses of China’s 35 cities jumped up 12.1% on month to 8.6 million tonnes, and the weekly rebar output from 137 Chinese mills recorded 3.88 million tonnes, down 3.3% on month but still at a relatively high level, according to Mysteel’s series of surveys.

In July, the gross margin of medium plate, another major steel product under Mysteel’s tracking, posted a rebound of Yuan 73/t on month to Yuan 148/t on average among the 91 mills, according to the report, disclosing their average VAT-included rebar production cost at Yuan 3,554/t, HRC at Yuan 3,674/t, and medium plate at Yuan 3,750/t.

(Written by Venus Wang, wangyi@mysteel.com; Edited by Hongmei Li, li.hongmei@mysteel.com)

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