High Raw Material Prices Erode the Profits of Domestic Steel Mills

SHANGHAI, Feb 22 (SMM) - The member enterprises of China Iron and Steel Association achieved an operating income of 6.59 trillion yuan, a year-on-year decrease of 6.35%; total profit was 98.2 billion yuan, a year-on-year decrease of 72.27%.

In 2022, the external environment facing the development of China's iron and steel industry was extremely severe, and the operation of the industry encountered greater difficulties and challenges. The overall operation trend of "weakening demand, falling prices, rising costs, and declining profits" has emerged.

According to data from the China Iron and Steel Association, in 2022, the procurement cost of imported iron ore (fines) for benchmarking steel mills decrease 24.16% year-on-year. The procurement cost of coking coal increased 24.91% year-on-year, creating greater pressure on the cost reduction plans of steel mills. Under such conditions, various steel mills have vigorously carried out activities to reduce costs and increase efficiency, and thus manufacturing costs have dropped. The cost of steelmaking for benchmarking steel mills has dropped 4.63% throughout the year.

Baogang Groupannounced on January 30 that the company expects a loss of 670 million to 1 billion yuan in 2022, and a net profit of 2.87 billion yuan attributable to the parent in the same period last year. In 2022, due to fluctuations in fuels and steel prices, and the impact of the pandemic, the gross profit margin of the company's main steel products dropped sharply.

On January 30, XinSteel Co. released its annual forecast, stating that the net profit attributable to shareholders of listed companies is estimated at 1.02-1.23 billion yuan, a year-on-year decrease of 71.58-76.42%.

Bensteel Plate Product Co., Ltd. released its 2022 annual forecast, stating that the net profit attributable to shareholders of listed companies is estimated at 1.09-1.33 billion yuan.

Liuzhou Iron and Steel issued a performance forecast expected that the net profit attributable to owners of the parent company in 2022 will be -1.98-2.68 billion mt.

Taigang Stainless Steel released a performance forecast and estimated that the net profit attributable to shareholders of listed companies in 2022 will be 130-165 million yuan, a year-on-year decrease of 97.39- 97.94%. Basic earnings per share will be 0.023-0.029 yuan. 

On January 31, Angang Group released its 2022 annual forecast, stating that the net profit attributable to shareholders of listed companies is estimated at 156 million yuan, a year-on-year increase of 97.76%.

Hunan Valin Iron&steel issued a performance forecast on the evening of February 14. It is expected that the net profit attributable to the parent company in 2022 will be 6.2-6.6 billion yuan, a year-on-year decrease of -36%.

On February 21, Jinzhou Pipeline released its 2022 performance report, stating that the company achieved operating income of 6.09 billion yuan in 2022, a year-on-year increase of 13.52%, and the net profit attributable to shareholders of listed companies was 235 million yuan, a year-on-year decrease of 39.18%. The company stated that the falling profits were caused by poor logistics and increasing costs.