China steel market oversupplied on faltering export, association

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

30 Apr 2009

Chinese steel market was under oversupply pressure in the first quarter mainly due to steady increase of domestic steel output but sharp fall of net export in the same period, according to China Steel Industry Association (CSIA). CSIA said that China produced 127.44 million tons of crude steel in the first quarter, up 1.75 million tons or 1.39 percent over the same period last year. Its pig iron output hit 122.38 million tons in this period, up 5.04 million tons or 4.29 percent year on year.
The first quarter saw the country's crude steel consumption slow its growth to reach 126.32 million tons, up 8.34 million tons or 7.08 percent over the same period last year.
However, China's net crude steel export (converted from steels and billet steel export) stood at 1.12 million tons only in the first quarter, down 6.59 million tons or 85.48 percent year on year.      
CSIA vice-chairman Luo Bingsheng said that the sharp decrease of net export exerted significant pressure on the domestic market and directly led to steel glut.
Luo pointed out that the narrower gap between FOB price of steels from China and CIF price to China in the first quarter also undermined the domestic steels' price advantage.
According to Luo, among the 72 large and midsize Chinese steel enterprises, 25 or 34.72 percent incurred losses in the first quarter, up 23.61 percentage points year on year.
These enterprises achieved sales of 450 billion yuan in the first quarter, down 21.74 percent from the same period last year, and pretax profits of 12.4 billion yuan, down 83 percent.
Their average cost in refining steel and pig iron went down 13.75 percent on year thanks to sliding prices of crude fuel such as the domestic concentrate fines, imported iron ore, pig iron, and scrap iron.
In the face of steel oversupply on the domestic market, Luo expected the top three iron ore giants of BHP Billiton, Rio Tinto and Vale to further cut iron ore price to realize mutual development.
Currently, Rio Tinto and Vale only accepted a 10 percent price cut, still far away from the target of over 40 percent set by CSIA.

Source: China Mining