China: Blast furnace mills gain profits on rebar sales in Aug

China's blast-furnace steel mills succeeded in winning some profits on rebar sales in August, thanks to the further decrease in their production costs, with the average profit among the 91 Chinese BF steel mills sampled in Mysteel's latest monthly survey reaching Yuan 41/tonne ($5.9/t), as against the average gross loss of Yuan 86/t in July.
Last month, the sampled steel mills' profit margin on selling medium plate averaged Yuan 11/t, also a marked improvement compared with the loss of Yuan 28 they had suffered during the prior month, according to Mysteel's assessment.

Although the 91 surveyed BF steelmakers still lost money on sales of hot-rolled coil in August, the average loss declined by a significant Yuan 169/t on month to Yuan 118/t, according to the survey.

One major reason for the improvement in mill profits was the continuous decrease in their production costs, as prices of major steelmaking raw materials including iron ore and coke softened continuously throughout the month, Mysteel Global learned.

For August, the cost for making hot metal among the 91 surveyed mills averaged Yuan 2,926/t excluding the 13% VAT, down for the fourth straight month by another Yuan 34/t or 1.1% on month.

Last month, Mysteel SEADEX 62% Australian Fines averaged $104/dmt CFR Qingdao, lower by another $3/t from the July average, while the price of class 2 metallurgical coke in North China fell again on month by a sharp Yuan 242/t to average Yuan 2,609/t, according to the survey.

Besides, Chinese steel prices recovered somewhat in August, Mysteel Global noted. Reduced production levels among domestic steel mills lifted sentiment, which also served to help expand the profit margins steelmakers earned on finished steel sales.

For example, the national price of HRB400E 20mm dia rebar, a bellwether of domestic steel-market sentiment, was assessed by Mysteel at Yuan 4,262/t including the 13% VAT on average in August, higher by Yuan 123/t on month.

However, domestic steel demand from end-users remained tepid last month due to the high temperatures in most regions of China, with the daily trading volume of construction steel comprising rebar, wire rod and bar-in-coil among the 237 Chinese trading houses under Mysteel's tracking averaging 147,431 tonnes/day in August, down 6,759 t/d or 4.4% from the prior month.

Written by Nancy Zheng, zhengmm@mysteel.com

This article has been published under an article exchange agreement between Mysteel Global and SteelMint.