SHANGHAI, Nov. 22 (SMM) – Profits at Chinese steel mills continued to fall during October, but conditions would improve in November, Steelease survey showed.
According to Steelease data, most Chinese steel mills were running in the red during October. Profits for rebar fell from a profit of RMB 4/mt in September to a loss of RMB 38/mt in October. Profits for hot-rolled declined during October as well, but in general, Steelease believes mill profits would improve during November for the following three reasons.
First, steel prices in China rose significantly during early November, due to trader speculation that the Third Plenary Session would produce some meaningful economic policies and shortages in some steel specifications. According to Steelease, the national average price for rebar rose from RMB 3,462/mt on October 31st to RMB 3,592/mt on November 14th, an increase of 3.76% in two weeks time.
Second, prices for raw materials rose only slightly during October, and these lower-priced goods were used for production during November, which would help keep costs down and profits up. Domestic iron ore prices, such as 66% Fe Concentrates Dry Basis in Qian'an, Hebei (ex-works price, including tax), were up by only RMB 10/mt during October, based on Steelease data.
Third, the China Iron and Steel Association showed that the average daily crude steel output at major medium and large-scale steel mills was 1.76 million mt during the first ten days of November, an increase of 3.5% from the previous ten days. Increased output would also translate into improved profits during November.