Firm profit margins continue to boost China's blast furnace steel production

The continuous and firm gains in Chinese steel prices during the past week saw the profit margins expanding further among domestic blast-furnace (BF) steelmakers, thereby encouraging the mills to lift their production, Mysteel's latest survey showed.

During April 12-18, the BF capacity utilization rate among the 247 steel producers under Mysteel's regular tracking had risen for the third straight week by another 0.54 percentage point on week to reach 84.59%.

During the same period, the daily average hot metal output of these sampled mills also went up by 14,700 tonnes/day or 0.7% on week to reach 2.26 million t/d, and their operational rates averaged 78.86%, higher by 0.45 percentage point on week, the survey showed.

The Chinese central government's introduction of multiple supportive policies for domestic consumption such as equipment upgrading plans has brightened market sentiment recently, leading to buoyant steel prices in the domestic market, Mysteel Global noted.

As of April 18, for example, China's national price of HRB400E 20mm dia rebar was assessed by Mysteel at Yuan 3,805/tonne ($535.4/t) including the 13% VAT, up by 124/t or 3.4% on week.

By the same day, around 48% of the sampled 247 steelmakers were able to make profits on the sales of finished steel, rising by a marked 10 percentage points from the previous week to touch the highest level since late August last year, according to Mysteel's tracking.

To secure the profits, more BF mills ramped up production in the past week, generating higher immediate demand for iron ore, market sources observed. During April 12-18, the daily consumption of imported iron ore among the 247 steelmakers under Mysteel's survey averaged 2.77 million t/d, higher by 8,900 t/d on week.

By April 18, the total inventories of imported iron ore in all forms held by the same steelmakers also went up by 447,600 tonnes on week to reach 93.6 million tonnes, the survey showed. This would be sufficient to last them for 33.9 days at their present use rate, longer by 0.1 day from the previous period, according to Mysteel's assessment.

Note: This article has been written in accordance with an article exchange agreement between MySteel Global and BigMint.