Posted on 27 Oct 2021
China's steel mills will see their profitability down for the remainder of 2021 with rising costs in raw materials and energy, with iron ore prices, for example, still hovering high at about $120/t recently despite the substantial declines so far in the second half of this year, the China Iron & Steel Association (CISA) warned at its latest press conference on October 25.
Coal and coke prices have been surging on relatively supply tightness and power supply shortage has led to more steel production cuts or even suspension of operations among the Chinese steel producers since September, the association elaborated.
Besides, uncertainties will be persisting in the growth in demand for steel and steel exports, as risks and challenges from the exterior will be intensifying with foreign countries showing disparity in the development of pandemic and economic recovery, and domestic economic recovery is still with imbalance and instability, according to CISA.
To counter the adverse impact on rising costs, CISA called for coordinated development in the value chain and reaching a stable supply relationship with upstream and downstream enterprises for the steel mills, such as pricing scheme optimization and hedging through futures for iron ore, and sizeable recycling and reuse of steel scrap.
As for downstream, the association suggested communication and cooperation between the steel mills and consumers such as real estate developers, machinery and auto manufacturers and shipbuilders.
Over January-September, Chinese steel mills' performance still improved on year with their profitability averaging 6.03%, or up 2.18 percentage points on year, and their debt-asset ratio averaged 61.37% by the end of September, down 1.58 percentage points on year, which was partly attributed to Beijing's efforts to rein in national steel output that had shown effect by September, Mysteel Global noted.
Last month, China's daily crude steel output fell to a three-year low of about 2.46 million tonnes/day, down 21.2% on year or 8.45% lower on month, and it was also down 24.6% from the peak in April, CISA highlighted.
Over January-September, China's long steel pricing index grew more slowly than flats, with the former up 37.07% on year while the latter up 43.56%, which matched the global trend, though, as international long steel prices grew 57% on year, much lower than the 115.4% on-year jump for flats during the same period, CISA shared.
Source:Mysteel Global
