China: Steel sector challenged by oversupply, rising costs

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

31 Oct 2010

China's medium and large iron and steel manufacturers are facing tough times this year, squeezed by market oversupply and increased production costs, the China Iron and Steel Association (CISA) said. China's crude steel output in the first three quarters of the year increased 12.74 percent to 474.53 million tonnes, CISA said in a report on its website.
Crude steel output per day in the nine-month period averaged 1.7382 million tonnes, equivalent to annual production of 634 million tonnes.
In the period, China was a net exporter of 22.51 million tonnes of crude steel. In the same period last year, it was a net importer of 1.37 million tonnes.
Inventory levels at China's 78 large- and medium-sized iron and steel companies peaked in May at 10.45 million tonnes and had dropped to 9.8 million tonnes by the end of August.
Steel inventory in the retail sector of 22 large and medium cities stood at 10.67 million tonnes at the end of August.
The report said the industry's production costs have increased because of higher imported-iron ore prices since the beginning of the year.
The average "landed price" of Chinese iron ore imports was 121.7 U.S. dollars per tonne, a 56.31 percent year-on-year increase. The landed price, or CIF price, includes costs, insurance and freight.
China's steelmakers paid 55.69 billion U.S. dollars for 457.6 million tonnes of imported iron ore in the nine-month period.
In the period, the volume of iron ore China imported was 11.53 tonnes less than the same period the previous year but the cost of the ore was 19.16 billion U.S. dollars more, the report said.
For the entire steel industry, 77 large and medium iron and steel companies reported a combined profit of 64 billion yuan (9.56 billion U.S. dollars) for the period, an average profit margin of 2.84 percent, well below the country's average industry profit margin.
Some 10 of the 77 firms posted combines losses of 2.39 billion yuan (357 million U.S. dollars) in the period.

Source: China.org.cn