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Nangang’s profit dip 35% in 2019, output 9% higher

Nanjing Iron and Steel Co (Nangang), one of the few Chinese steel mills to have released its 2019 performance reports so far, posted a 35% year-on-year decline in net profit despite a 9.2% annual rise in steel output, mainly because of the surging raw materials prices while declines in finished steel prices last year, according to its release on March 25.
Headquartered in East China’s Jiangsu province, Nangang’s net profit totalled Yuan 2.6 billion ($368.2 million) and crude steel production reached 10.1 million tonnes, according to the release. Its molten iron and finished steel products both increased by a similar degree too, with the former up 9% on year to 9.9 million tonnes and the latter up 8.2% on year also to 9.9 million tonnes.

Thanks to the rise in production, Nangang’s operation revenue from its steel business moved up 4.3% on year to Yuan 41 billion. However, higher steel production failed to lead to higher margins, as costs of steelmaking raw materials including iron ore and fuel had climbed more substantially, with the mill’s costs for iron ore procurement for example, rocketing by 51.3% on year to Yuan 12 billion. Admittedly, during the year Nangang’s iron ore consumption leapt by as large 19.8% on year to 16.5 million tonnes, sourced from domestic and overseas mines including tonnage from its own captive mine (See Table A).

On the other hand, Nangang’s average sales price across all its products also declined amid an overall weakening of domestic steel prices in 2019. The decline was 4% on year – with the average at Yuan 3,923/t excluding the 13% VAT – which was less than the overall 6.6% year-on-year decline in China’s domestic steel prices last year, thanks to the mill’s comparatively higher ratio of value-added steel products in its sales.

Among its core steel products, flat steel such as shipbuilding plate, container steel and bridge-building steel contributed to 5 million tonnes or some 50.5% of total production. Nangang also exported 503,900 tonnes of steel products, up 31.5% on year, according to the report.

Significantly, the production of value-added and high-end products including high-strength steel plate and abrasion-resistant steel rose by 5% on year to 1.4 million tonnes last year.  

For 2020, Nangang targets to produce 10.5 million tonnes of molten iron and 11.6 million tonnes of crude steel, up 6% and 5.7% on year, while it expects finished steel output to grow at a much lower pace of 2.3% on year to 10.2 million tonnes, according to the release.

Written by Anna Wu, wub@mysteel.com
Edited by Hongmei Li, li.hongmei@mysteel.com


Table A Nangang’s iron ore procurement cost in 2019

 

Iron ore supply (t)

Procurement cost
 (mln yuan)

2019

YoY

2019

YoY

Captive mines

998,959

8.6%

840.5

39.3%

Domestic procurement

1,944,250

62.1%

1,363.3

115.4%

Imports

13,564,340

16.4%

9,839.7

46.3%

 

Table B Results comparison of three steelmakers releasing 2019 annual reports

 

Operation revenue
(mln yuan)

Operation cost
(mln yuan)

Net profit
(mln yuan)

2019

YoY

2019

YoY

2019

YoY

Hunan Valin Steel Co

107,116

5.8%

92,636

11.5

4,391

-40.5%

Shandong Iron & Steel Co

71,092

27.2%

66,401

32.7%

579

-72.5%

Nangang

47,970

9.9%

41,600

19.3%

2,606

-35%