22/10/14 – China steel sector to see weak recovery in Q4 – CISA

Chinese steel mills see signs of a weak recovery in profit following a widespread loss in the sector. 88 key steel mills monitored by the China Iron and Steel Association posted a combined profit of CNY 4.604 billion in August with a margin of 1.52%. Only 14 mills, accounting for 15.91%, suffered losses, totalling CNY 0.927 billion.

A CISA official said that there are signs of a weak recovery in steel sector, as evidenced by August data, citing the falls in short term bank loans and asset-liability ratio and lower stockpiles than early this year.

The official pointed that the steel industry would see a relatively stable recovery in the fourth quarter should steel prices maintain at current level as low priced iron ore would be gradually put in steelmaking activity.

The relationship between steel mills and miners seems to have taken some changes with the sector entering cold winter. Large scale miners, including Rio Tinto and BHP Billiton, have begun to increase production, aiming to reduce costs to benefit Chinese steel mills and seize the Chinese market, while squeezing miners in the country and other rival suppliers.

According to data released by the General Administration of Customs, the average price of iron ore delivered to China declined to USD 90.85 per tonne in August, the lowest level since January 2010. It can be calculated that China’s mainstream iron ore import price slumped nearly 41% since early this year, with a cumulative fall of more than 48% in four years.

The global mining giants, including BHP Billiton, Rio Tinto and Vale, are also seeking to expand capacity. Rio Tinto aims to ramp up it capacity to 360 million tonnes annually from current 290 million tonnes and BHP Billiton pledges to increase its capacity to 290 million tonnes by mid 2017 from 225 million tonnes in the last fiscal year.

Source – SteelHome.cn (China steel information centre and industry database)