SHANGHAI, Jul 3 (SMM) – Following the rising futures market, Chinese steelmakers have seen their profit margins on rebar recover in the recent fortnight, which is likely to deter them from trimming output.
The most traded rebar contract on the Shanghai Futures Exchange climbed for 10 trading days in a row to a high of 4,148 yuan/mt on Monday July 1, its highest in more than eight months.
Spot prices, meanwhile, saw their nationwide average rise to 4,133.1 yuan/mt on Monday, up 213.1 yuan/mt from 3,920 yuan/mt touched on June 18, according to SMM assessments.
As gains in rebar exceeded the growth in iron ore prices, margins across steelmakers that used use iron ore as major feedstock rebounded. Mills, with exiting iron ore inventories, saw a larger increase in margins.
SMM calculations showed that margins in rebar stood at 326 yuan/mt as of Tuesday July 2, based on iron ore of $121.65/mt. This is much higher than hot-rolled coil margins of 201 yuan/mt.
Rising steel prices also prompted some mills who use steel scrap as major feedstock in the east to recover production, SMM learned.
Such mills in the south, however, continued their production curtailments as their profits have yet to move into positive territory on current steel prices.