CISA mills’ H1 profits surge 151% but from low base
The member steel mills of the China Iron and Steel Association (CISA) achieved total profits of Yuan 139.3 billion ($20.5 billion) during this year’s January-June half, up by a sizzling 151.2% on year, a CISA official confirmed on Wednesday.
“The increase may look quite substantial and impressive, but part of the reason was that the total of profits among our member mills during last year’s H1 was still comparatively low,” he explained.
China's steel industry in general has finally caught up with many of the country's other industries in profitability, and some steelmakers may have been enjoying much higher margins than others, the CISA official acknowledged. But it would be a mistake to assume that some individual mills' performances are representative of the whole industry, he cautioned.
The profit ratio of all large-scale Chinese industries over January-June was 6.36%, data from China’s National Bureau of Statistics (NBS) showed. CISA did not reveal the exact average profit ratio which its around 100-member mills enjoyed in H1, but the ratio for 2017 stood at only 4.7%, Mysteel notes.
For the current July-December half, the steel industry is unlikely to post a similar jump in on-year profit growth, as the mills’ profits during July-December last year improved markedly on last year’s first half, according to the official. Also, the latter half of this year is shrouded in more uncertainty.
However, steelmaker officials contacted by Mysteel were still optimistic about the level of profits they expect to enjoy this half.
“As long as demand remains strong, our profit can be secured. I am sure this will be the case, at least until October,” an official from a Henan-based steel mill said confidently. “As building contractors will face tough restrictions during the coming winter, the construction firms will have to concentrate their work during a couple of months in the middle of the year. The time constraints will force them to speed up, which is why demand is still comparatively robust in the traditionally weak demand summer seasons over June-August,” he elaborated.
In the winter months of November-March, China will again place severe limits on activities which create dust – such as earthmoving and site excavation – along with those of other heavy-polluting industries to curb severe air pollution, the government has announced.
For this reason, according to the Henan mill official, Chinese steel prices will top the six-year highs they recorded last year in H2. “Compared with the loss they (the construction companies) will be facing as a result of delays in completing their projects, some increases in steel prices will be minor,” he said.
As of July 26, Mysteel’s HRB 400 20mm dia rebar benchmark price was at Yuan 4,241/tonne including the 16% VAT, still some distance away from the six-year high of Yuan 4,908/t which rebar hit last December.
Written by Hongmei Li, li.hongmei@mysteel.com and Olivia Zhang, zhangwd@mysteel.com
Edited by Russ McCulloch, russ.mcculloch@mysteel.com
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