MONTHLY: Firm prices net mills, re-rollers more profits
Major Chinese steelmakers whose margins for the three long and flat products Mysteel regularly monitors earned more from them last month, thanks mostly to the surges in domestic steel prices, according to Mysteel’s latest monthly study released on August 6. The three products are rebar, hot-rolled coil and medium plate, and the survey sample comprises 91 blast furnace mills and ten re-rollers.
The study, spanning June 26 to July 25, found that the most profitable item for the integrated makers last month was rebars, with the makers’ margins on these increasing by an average of Yuan 154/tonne ($22.6/t) on month to reach Yuan 847/t. The mills’ profits on medium plate rose by Yuan 80/t on month to Yuan 811/t, while their profits on HRC were almost unchanged on-month – up by just a tiny Yuan 1/t – to reach Yuan 717/t.
The BF mills did very well last month, given that the market in summer is traditionally dull. Prices rose – and thus, the mills’ margins – on concerns about tightening supply from the ongoing restrictions on the operations of steelmakers in North China’s Hebei province and East China’s Jiangsu province under the current blitz on pollution, as reported.
Hebei and Jiangsu, which last year produced 191 million tonnes and 104 million tonnes of crude steel respectively, accounted for 36% of China’s steel production last year, Mysteel notes.
The national average price of HRB 400 20mm dia rebar increased by Yuan 63/t last month, according to Mysteel’s calculations, to reach Yuan 4,235/t including 16% VAT as of July 25. Rebar prices are seen climbing further in the weeks ahead.
But it wasn’t price alone which helped the integrated mills. The BF mills also enjoyed lower production costs last month from the slight reduction in raw materials prices, with Mysteel’s 62% iron ore pricing index inching down $0.37/dmt on month to $64.38/dmt CFR Qingdao. The average price of second-grade metallurgical coke fell Yuan 27/t on month to Yuan 2,145/t including 16% VAT, according to the study.
Meanwhile, among the ten re-rollers Mysteel surveyed, their average profit in rolling rebar climbed by Yuan 75/t on month to Yuan 175/t as of July 25. But of late, the re-rollers’ profits have been undermined a little by the rise in prices of billets, with the average price of Q235 grade carbon steel billet in Tangshan gaining Yuan 49/t on month in July to reach Yuan 3,733/t EXW and including 16% VAT. The climb in billet prices followed the uptick in finished steel prices, Mysteel notes.
Written by Venus Wang, wangyi@mysteel.com
Edited by Russ McCulloch, russ.mcculloch@mysteel.com
Table 1 Production costs and profits for rebar, HRC and plate
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