CISA: China's steel profitable in Q1, risks lurking
Source: Mysteel
Apr 27, 2018 16:58
Member steel mills of the China Iron and Steel Association (CISA) posted a total gross profit at Yuan 56.9 billion ($9 billion) over January-March, but a few adverse factors will challenge the industry for the rest of the year, according to CISA’s Q1 steel industrial performance press release issued on April 27.
“The total gains, however, were lower than Q4 2017… which, nevertheless, was already hard achieved in the context of domestic steel price declines during the period,” CISA stated in the post.
CISA’s over 100 steelmaking members generated Yuan 899 billion in steel sales in the first quarter of 2018, or up 6.4% on year, according to the association, while Mysteel’s carbon steel pricing index showed a decline of 10% or Yuan 445/t on quarter to Yuan 4,026/t including 17% VAT.
Meanwhile, China’s steel industry should be aware of a few risks, CISA warned.
The country’s daily crude steel output hit a record high of 2.36 million tonnes/day for Q1 or 2.39 million t/d for March alone, which could lead to 860 million tonnes of crude steel output for 2018 at this rate.
Besides, “steel inventories both at the Chinese steel mills and traders have been at rather high levels by the end of March, which steel mills need to intensify the efforts in curtailing output and at the same time destocking,” CISA said.
Finished steel inventories at the traders in the 22 major Chinese cities added up to 15.4 million tonnes, or 8 million tonnes higher than the end of 2017, and that at CISA’s member mills totaled 14.4 million tonne, or up 19.8% from the beginning of 2018, according to the association.
“Oversupply in the iron ore market is worsening, which is unlikely to lend support to iron ore price,” CISA pointed out under the present circumstances of the steel market and historically high iron ore port inventories.
By the end of March, iron ore inventories hovered at 160 million tonnes despite that China’s pig iron output dropped 1.2% on year to 175 million tonnes, and the seaborne iron ore price already fell $9.28/tonne to $71.99/t CFR China, according to CISA.
For the remaining 2018, a few crucial challenges will continue to weigh on China’s steel industry, such as too fast steel output growth, possible steel capacity expansion legally or illegally especially via EAF amid steel margins, and the growing uncertainty in China’s steel exports amid the worsening Sino-US trade friction due to US’ trade protectionism.
“Too frequent steel capacity cuts and halts by some local authorities to the steel mills via one-for-all measures are making it hard for steel mills to guarantee normal and rational operations,” CISA pointed out.
China’s ferrous industry including iron and steelmaking and rolling posted a combined profit at Yuan 79.8 billion for Q1, up 64.1% on year, which was 52.5 percentage points higher than the increase in profits for China’s whole industrial sector, according to the latest statistics released by China’s National Bureau of Statistics (NBS) on April 27.
China’s ferrous industry posted a 10% year-on-year gain to Yuan 1.5 trillion in business revenue, according to NBS.
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