Posted on 30 Jul 2021
The profit margins of China’s blast furnace (BF) and electric-arc-furnace (EAF) steel mills recovered fast in July, mainly thanks to the steady growth in domestic steel prices and the reduction in their steelmaking costs.
As of July 27, the profits that the domestic BF mills earned on rebar sales averaged Yuan 718/tonne ($110/t), rising by a sharp Yuan 722/t from one month before, according to Mysteel’s estimation based on the current steel and raw material prices. Helping the margins improve was the Yuan 188/t on-month drop in production costs to average Yuan 4,782/t including the 13% VAT.
The fast recovery in mills’ profits was mainly attributed to firming steel prices. These have started climbing because of mounting concerns that steel output will be cut during the rest of this year, as reported.
Many Chinese steel mills have received local government requests to reduce their steel output in H2. “Some steel mills have already taken steps such as reducing the procurement of iron ore, conducting maintenance on their steelmaking facilities or delaying the start of new projects,” a market source in Shanghai said.
The likelihood of production curbs being imposed boosted the optimism in China’s steel market but also put some pressure on raw material prices such as imported iron ore, Mysteel Global noted.
For example, the national price of HRB400E 20mm dia rebar, a bellwether of China’s steel-market sentiment, was assessed by Mysteel at Yuan 5,467/t including the 13% VAT as of July 27, gaining Yuan 520/t on month and marking the highest since May 20, while Mysteel SEADEX 62% Australian Fines index dropped by $19.25/dmt on month to a nearly two-month low of $199.05/dmt CFR Qingdao as of the same day.
July is the traditional off-season for steel consumption in China with the high temperatures and heavy rainfalls affecting most regions of the country. Spot steel demand from end-users is indeed sluggish this month, especially for the second half of July, with the severe flooding in Central China’s Henan province, and with typhoon In-Fa bringing heavy rains this week to East China’s Zhejiang, Shanghai and Jiangsu, as reported.
Mysteel’s other survey showed that the daily trading volume of construction steel comprising rebar, wire rod and bar-in-coil among the 237 Chinese traders under Mysteel’s monitoring slipped for the third working day to 141,897 tonnes/day as of July 27, lower by another 34,005 t/d or 19.3% on day and hitting the lowest since May 27.
Source:Mysteel Global
