China Steel Makers Gain Profit, But Immediate Outlook Bleak

SHANGHAI, May 31 -- China's 77 large and medium-sized steel makers scored a profit of 33.9 billion yuan (4.97 billion U.S. dollars) in the first four months, compared with a 4.1 billion yuan loss during the same period last year.

Luo Bingsheng, vice chairman of the China Iron and Steel Association (CISA), said Saturday the overall profit margin for China's steel industry in the first four months was just 3.6 percent, lower than the average profit margin of the country's industrial sector.

Cost of steel production would continue to rise from that of the first quarter given increased iron ore prices and depleted inventories, he told the seventh "Shanghai Derivative Market Forum" held by the Shanghai Futures Exchange..

The average CIF (cost, insurance and freight) price of iron ore in the Jan-April period has increased 26.1 percent year on year.

Meanwhile, the domestic steel prices have began to drop from the mid-April. Price of deformed steel bars slid 10 percent to 4,000 yuan per tonne, Luo said.

Pressed by lower sales prices and increasing cost, steel industry will experience another round of profit losses. Some steel makers may even slide into the red again, he said.

From January to April, the gross production of crude steel worldwide has increased 31.8 percent year on year, while the presumed apparent demand for steel this year grew only 10.7 percent, according to the International Iron and Steel Institute.

That means the competition in the international steel market would become even more fierce, he said.