The upsurge in global iron ore price pushed up operating cost of Chinese steel mills, therefore, China steel industry saw slender profit on high cost in the first quarter of this year, said Zhang Changfu, Vice Presient of China Iron and Steel Association (CISA) on April 29. According to a survey on the actural purchasing cost of CISA's 57 members, coking coal price rose 15.17 percent year on year, PCI increased 21.35 percent, metallurgical coal hiked 8.77 percent, domestic iron concentrates soared 42.71 percent while imported iron ore surged 54.41 percent. On balance, the average operating cost of steelmaking pig iron increased by 27.52 percent year on year in the first quarter of 2011.
China's imported iron ore price averaged at US$156.62 per tonne (CIF) in the first quarter of this year, up US$60.31 per tonne or 62.62 percent year on year.
China has produced 169.9086 million tonnes of crude steel in the first quarter of this year, up 8.69 percent year on year. Daily crude steel output hit a record high of 1.9352 million tonnes in Jan.-Feb. and the annualized rate reached 706 million tonnes. Production growth hit 6.86 percent in large and medium-sized steel mills and 52.72 percent in smaller ones. It can be seen that large and medium-sized steel mills are more sensible on production but over 50 percent growth in smallers ones exert great pressure on the market, said Zhang.
Steel inventory grew rapidly on high production and slow demand. According to statistics from CISA, inventory of five major steel products hit 13.58 million tonnes in 22 domestic key markets in the end of March, up 39.28 percent compared with early this year. Inventory of CISA's members reached 10.5374 million tonnes in the end of February, up 40.65 percent.
Operating cost increased sharply and steel price was hard to further rise, which mainly contributed to the low profit of Chinese steel mills. Sales margin of CISA's 77 members stayed at 2.91 percent, 3.29 percentage points lower than 6.2 percent, the average level of all industries.
Steelmaking capacity has reached 768 million tonnes in the end of 2010, obviously higher than domestic demand. In view of current situation, strict control on production growth and capacity expansion will be the major task for China steel industry, Zhang said.
( Source: www.steelhome.com )