Mr Qi Xiangdong vice secretary-general of CISA was quoted as saying on May 26th that "77 large and medium steel makers realized profits of CNY 12.2 billion in April."
Insiders from Hebei Province disclosed that steel makers' did not receive too many orders for June delivery owing to the continuously falling steel price.
In Q1, large and medium steel mills totally gained profits of 21.774 billion yuan. But the rate of return on net sales only stood at 3.25%, lower than the average level of national industries. The rate of return on net sales during January to April period was pushed up to 3.6% by the quickly rising steel price at the beginning of the second quarter.
A senior official from Hebei Steel Group attributes the weak market sentiment and price decrease in May to the swing in China policy. The official said "Steel mills are likely to cut production during the first twenty days of June as dealers are delaying or trimming orders with mills owing to the weak market. This will bolster steel price. At present, domestic steel price for most products is much lower than international price. Therefore, the price adjustment will not last too long."
A senior official from Shougang Group pointed out that the steel industry might face great losses in a whole due to the high costs of raw materials. Those steel mills with self-supported iron ore may have better performance.
Mr Qi told the reporter that steel mills would report losses if rebar price was lower than CNY 4000 per tonne given the present steel producing costs. Only when rebar price is or higher than CNY 4500 per tonne can steel makers break even and make minimal profits.
He said that steel demand remains strong as social steel inventory keeps falling. But the problem is the weak market sentiment. Most downstream consumers also adopt wait-and-see attitude.