MONTHLY: China BF mills lose more money on major steel sales in May

• Steel mill losses deepened amid rising costs
  
  
• Weak demand caused May transaction declines
  
  

Mysteel Global: China's blast-furnace (BF) steel mills lost more money on their finished steel sales last month, mainly due to the weakness of finished steel prices and the rise in production costs the mills suffered from higher prices of major steelmaking raw materials, according to Mysteel's latest monthly survey.

Last month, the average loss on rebar sales suffered by the sampled steelmakers reached Yuan 117/tonne ($17.3/t), deepening from the Yuan 39/t they endured in April, while their average loss on sales of hot-rolled coil (HRC) widened to Yuan 68/t from the loss of Yuan 14/t the month before.

The sampled BF steelmakers also swung into the red on sales of medium plate in May, making an average loss of Yuan 5/t, as against the profit of Yuan 5/t the previous month, the survey results showed.

The production costs for domestic steel mills increased significantly in May, as prices of key raw materials such as iron ore and coke strengthened, undermining their profitability, Mysteel Global noted.

In May, the Mysteel SEADEX 62% Australian Fines iron ore index averaged $110/dmt CFR Qingdao, rising by $1/dmt on month. At the same time, the average price of second-grade metallurgical coke in North China under Mysteel's assessment had jumped by Yuan 80/t on month to Yuan 1,526/t, mainly due to the broad suspension of coal mining operations in North China's Shanxi province for safety inspections, as reported.

As a result, during May the average production cost for making rebar among the sampled BF steelmakers increased by Yuan 59/t on month to Yuan 3,236/t including the 13% VAT, while that for making HRC and medium plate averaged Yuan 3,385/t and Yuan 3,415/t including the VAT, gaining by Yuan 56/t and Yuan 52/t respectively from April, according to the survey.

Hurting the mills too was the fact that finished steel prices lost the impetus to rise in the second half of May, as demand from end-users showed signs of weakening with the approach of summer, the off-season for steel consumption in China.

At the end of last month, Mysteel assessed the national price of HRB400E 20mm dia rebar at Yuan 3,423/t including the 13% VAT, falling by Yuan 88/t from the recent high on May 12 though still Yuan 8/t higher compared with end-April.

Similarly, on May 29, Mysteel assessed the national average price of Q235 4.75mm HRC to be at Yuan 3,425/t including the 13% VAT, higher by Yuan 11/t on month but lower by Yuan 73/t from the recent high recorded on May 11.

The gradual shrinking of demand also caused transactions of finished steel in the physical market to slow in May. For example, the daily trading volume of construction steel comprising rebar, wire rod and bar-in-coil among the 237 trading houses nationwide monitored by Mysteel averaged 97,837 tonnes/day in May, sliding by 12,546 t/d or 11.3% on month.

Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.