Last month Chinese blast-furnace steelmakers earned less profit from sales of the three major carbon steel products – namely rebar, hot-rolled coils and medium plate – due to higher production costs in September, according to Mysteel’s latest mill production survey.
The survey, spanning August 26-September 25, showed that their profits on medium plate declined the most among the three items, declining by a savage Yuan 184/tonne ($27/t) over the month to Yuan 662/t. On the other hand, the mills’ profits on rebars weakened by just Yuan 59/t on month to Yuan 941/t, while those the mills made selling HRC decreased by Yuan 146/t on month to Yuan 593/t.
Higher raw materials costs did the most damage to the mills’ bottom line, the survey found. Mysteel’s 62% iron ore pricing index increased by another $1.61/dmt on month during September, averaging $69.95/dmt CFR Qingdao. More significantly, the average price of second-grade metallurgical coke surged by Yuan 267/t on month to Yuan 2,492/t including 16% VAT, Mysteel notes.
The replenishing activities of steel mills stocking up iron ore ahead of the National Day holiday over October 1-7 was the chief driver of the rise in ore prices, a Shanghai-based industry source said, pointing out that the mills wanted to build inventory to ensure normal production during the break. This year as usual, the Chinese steel mills continued operating while the rest of the country was vacationing, Mysteel notes.
But the higher coke prices were also a headache for the mills last month. An official with a Hebei-based steel mill pointed out the price upsurge in coke actually started from August due to the massive restrictions on coking plant operations in North China’s Shanxi province, China’s largest coking centre. “Under the pressure of (coke) prices constantly strengthening, we have had to buy large quantities of coke to avoid paying more money in the future – which only accelerated the climb in prices,” he added.
Mysteel’s coke price index reached a 10-year peak on September 11 of Yuan 2,563/t before falling back to Yuan 2,438/t as of September 25, still at a high level, according to Mysteel’s database.
Consequently, the average production cost in making rebar increased by 2.1% on month to Yuan 3,473/t in the latest surveyed period, while that for hot-coiled coils increased 1.6% on month to Yuan 3,605/t, and that for medium plate by 1.8% over the month to Yuan 3,647/t. All prices included 16% VAT.
On the other hand, re-rollers were spared most of the impact of the mills’ higher raw materials costs and so enjoyed better profits, as shown in Mysteel’s survey of ten leading re-rollers. In fact, the average price of Tangshan Q235 billet during the surveyed period fell by Yuan 20/t on month to Yuan 3,998/t EXW and including 16% VAT. This resulted in a direct improvement in the average profits the re-rollers earned from selling rebars, lifting this to Yuan 255/t, higher by Yuan 120/t on month.
Written by Venus Wang, wangyi@mysteel.com
Edited by Russ McCulloch, russ.mcculloch@mysteel.com
