China: Blast furnace mills' profits gain on lower cost in July

Profits among the 91 Chinese blast-furnace steel mills sampled regularly by Mysteel reversed up in July after the decrease seen over the prior two months, mainly thanks to lower steelmaking costs and the recovery in finished steel prices.

Mysteel's latest monthly survey released on August 10 showed that the average margins the sampled mills earned on rebar sales registered Yuan 297/tonne ($45.8/t) during July, jumping by Yuan 444/t from the average loss of Yuan 147/t in June.

The surveyed steel mills also gained a better profit on their sales of flat steel last month, with that for hot-rolled coil (HRC) reaching Yuan 675/t, up Yuan 421/t on month, the survey showed, and that for medium plates posted larger growth of Yuan 446/t on month to average Yuan 675/t.

One major reason for the substantial recovery in the mills' profits was the retreat in major steelmaking raw material prices including those of imported iron ore and coke in July, Mysteel Global noted.

Last month, the cost of making molten iron among the surveyed 91 BF mills was assessed by Mysteel at Yuan 3,446/t excluding the 13% VAT on average, reversing down Yuan 44/t or 1.3% from that for June. During the month, the Mysteel SEADEX 62% Australian Fines index averaged $210/dmt CFR Qingdao - down $3/dmt on month after growing for the previous four months - while the price of secondary metallurgical coke in North China had slipped by Yuan 38/t on month to Yuan 2,710/t on average.

At the same time, domestic finished steel prices grew steadily last month, lifted by market expectations about widespread production cuts in the remainder of 2021 to fulfil Beijing's target to lower steel output this year. Some negative factors limited the growth in prices however, including the lacklustre demand from steel end-users affected by the high temperatures and heavy rain in most regions of China, and resurgence of COVID-19 in Nanjing and Yangzhou in East China's Jiangsu province.

For example, the national price of HRB400E 20mm dia rebar was assessed by Mysteel at Yuan 5,479/t including the 13% VAT as of July 30, gaining Yuan 540/t on month, while that of Q235 4.75mm HRC jumped by Yuan 532/t during the same period to Yuan 5,933/t including the VAT.

Another 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 averaged 187,418 tonnes/day in July, down another 6,801 t/d or 3.5% compared with the average for June.

Written by Nancy Zheng, zhengmm@mysteel.com

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