Nangang’s profit dip 35% in 2019, output 9% higher
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 |
||
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 |
Operation cost |
Net profit |
|||
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% |
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