China: Imported iron ore price relief for steelmakers offset by coking coal cost hike

• Production costs for mills rise amid shrinking margins
  
  
• Iron ore may continue on declining trajectory
  
  
• Coking coal could witness sudden spurt
  
  

Morning Brief: The cost scenario for Chinese steel companies reveals mixed trends in September 2022. While procurement costs of iron ore, coking coal and coke continued to decline, PCI and thermal coals, pig iron as well as scrap purchase prices increased, as per latest data from the China Iron & Steel (CISA) Association Benchmarking and Tapping Office.

January-September data, however, throws up a different picture. During the period, the purchase cost of coking coal increased by 51.08% y-o-y, while that for metallurgical coke increased by 13.98% on the year. Domestic iron concentrates costs, however, decreased by 26.61%, while imported iron ore fines fell by 28.02% along with scrap steel, which decreased by 0.28% on-year.

Coking coal
In September, the weighted average purchase cost of coking coal of the benchmarking enterprises (converted to dry basis) was RMB 2,154.82/t ($297), a m-o-m fall of RMB 62.4/t ($8.6), a decrease of 2.81%. In January-September, the cumulative average purchase cost was RMB 2414.10/t ($333), a y-o-y increase of RMB 816.22/t.

From January to September, the weighted average procurement cost of the top five enterprises with the lowest average procurement cost of coking coal in the benchmark enterprises was RMB 1,839.98/t ($254), which was RMB 574.13/t lower than the average procurement cost of the benchmark enterprises, which was lower than the average procurement cost.

The weighted average procurement cost of the five companies with the highest procurement cost was RMB 2690.44/t, which was RMB 276.34/t higher than the average procurement cost of the benchmark companies, and 11.45% higher than the average procurement cost.

PCI
In September, the weighted average purchase cost of PCI (converted to dry basis) was RMB 1560.83/t ($215), an increase of RMB 113.84/t from the previous month, an increase of 7.87%. From January to September, the cumulative average purchase cost was RMB 1,628.11/t, an increase of RMB 467.31/t, or 40.26% y-o-y.

In January-September, the weighted average procurement cost of the top five companies with the lowest average procurement cost of PCI was RMB 1,196.55/t, RMB 431.56/t lower than the average procurement cost of the benchmarking companies, which was lower than the average. The procurement cost was 26.51%; the weighted average procurement cost of the five companies with the highest procurement cost was RMB 2,014.23/t, which was RMB 386.12/t higher than the average procurement cost of the benchmark companies, and 23.72% higher than the average procurement cost.

Metallurgical coke
The weighted average purchase cost of metallurgical coke in September was RMB 2,596.84/t ($358), a decrease of RMB 6.51/t m-o-m, down 0.25%. From January to September, the cumulative average purchase cost was RMB 3 038.26/t, an increase of RMB 372.54/t, a y-o-y increase of 13.98%.

In January-September, the weighted average procurement cost of the top five enterprises with the lowest average procurement cost of metallurgical coke in the benchmarking enterprises was RMB 2,568.75/t, which was RMB 469.51/t lower than the average procurement cost of the benchmarking enterprises, and 15.45% lower than the average procurement cost.

The weighted average procurement cost of the five companies with the highest procurement costs was RMB 3,401.19/t, which was RMB 362.93/t higher than the average procurement cost of the benchmark companies, and 11.95% higher than the average procurement cost.

Domestic iron ore concentrates
The weighted average procurement cost of domestic iron ore concentrate (on dry basis) in September was RMB 736.30/t ($101.5), a month-on-month decrease of 34.11 yuan/ton, a decrease of 4.43%. The cumulative average purchase cost from January to September was RMB 857.26/t, a y-o-y decrease of RMB 310.81/t, a decrease of 26.61%.

From January to September, the average procurement cost of domestic iron ore concentrates of benchmark enterprises converted into 62% grade was RMB 841.48/t ($116/t), and the top five enterprises with the lowest cost were Jiujiang Pinggang Iron and Steel Co., Ltd., Sichuan Chuanwei Iron and Steel Group Co., Ltd., Sichuan Desheng Group Vanadium and Titanium Co., Ltd., Shaanxi Lueyang Iron and Steel Co., Ltd., Kunming Iron and Steel Co., Ltd., the weighted average procurement cost of these five enterprises is RMB 694.39/t, which is RMB 147.09/t lower than the average procurement cost of the benchmark enterprises. The weighted average procurement cost of the five companies with the highest procurement cost was RMB 1,066.72/t, which was RMB 225.24/t higher than the average procurement cost of the benchmark companies, and 26.77% higher than the average procurement cost.

Imported iron ore fines
The weighted average purchase cost of imported iron ore fines in September was RMB 772.39/t ($116.50), a m-o-m decrease of RMB 36.7/t, a decrease of 4.55%. The cumulative average purchase cost from January to September was RMB 867.54/t, a y-o-y decrease of RMB 337.76/t, a decrease of 28.02%.

In January-September, the average procurement cost of the benchmark imported fine ore converted into 62% grade was RMB 883.21/t, and the weighted average procurement cost of the top five enterprises with the lowest cost was RMB 774.91/t compared with the average procurement cost of the benchmark enterprise.

From January to September, the total purchase of iron ore imported by the benchmarking enterprises was 387.5376 million tonnes (mnt), and the average purchase cost converted to Fe62% grade was RMB 914.40/t.

The weighted average procurement cost of the top five companies with the lowest procurement cost was RMB 812.53/t, which is RMB 101.86/t lower than the average procurement cost of the benchmark companies and 11.14% lower than the average procurement cost; while the weighted average procurement cost of the five companies with the highest procurement cost was RMB 1,073.61/t, RMB 159.21/t higher than the average procurement cost of the benchmark enterprises, and 17.41% higher than the average procurement cost.

Ferrous scrap
The weighted average procurement cost of scrap steel in September was RMB 2,788.17/t ($384), up RMB 52.73/t from the previous month, an increase of 1.93%. The cumulative average purchase cost from January- September was RMB 3,226.27/t, a y-o-y decrease of RMB 8.90/t, or 0.28%.

In January-September, the weighted average procurement cost of the top five companies with the lowest average scrap purchase cost of the benchmarking companies was RMB 2,934.46/t, which was RMB 291.81/t lower than the average procurement cost of the benchmarking companies, and 9.04% lower than the average procurement cost.

The weighted average procurement cost of the five companies with the highest procurement cost was RMB 3,478.91/t, which was RMB 252.64/t higher than the average procurement cost of the benchmark companies, and 7.83% higher than the average procurement cost.