Small Steel Mills in China Ramp up Production as Market Recovers - Reports

TANGSHAN, July 21 -- Mr Zhang Xiaoning, deputy GM of Tangshan Grand Faith Steel Co Ltd, said that "Most steel mills in Hebei Tangshan, the top steel production city in China, have resumed operation, as demand has picked up considerably since the Q2."

    Mr Haifeng said that traders are also embracing a good time. Exporters generally hold order books at present, while profit margin for domestic trades even better than export.

    He said that export conditions have turned much better after the 4 percentage points export tax rebate hikes since June 12th which means CNY 140 more profit for per tonne steel shipment, a nice rise.

    The whole market figures are also on the rise. Steel production, price index and apparent usage both rallied since early April. And according to Mr Chen Ling deputy director of China Metallurgical Economic Research Center, steel market is climbing out of downturn after several months of low operation.

    1. Both price, production rise

    Prices for major steel products have stepped on the upward course since early April and rebar price in Shanghai in early July has rallied a total of 21.9% from April low. Meanwhile, leading mills like Baosteel, Wuhan Steel and Hebei Iron & Steel Group are also raising ex-works prices successively.

    According to State Statistics Bureau steel production also shot up amid steel price rise which has been sustaining for 3 months in a row. Crude steel output in China posted at 49.43 million tonnes in June or 1.65 million tonnes per day both hit historical high.

    The continuous price rise has finally pulled China’s steel industry out of deficit. China Iron & Steel Association has earlier reported its 72 member units have made a profit of CNY 1.262 billion in May, ending a losing streak of 7 months. And profits in June seems will be better.

    Mr Chen said meanwhile, a new wave of ex-works price rise for August has started, with the size ranging between CNY 50 per tonne to CNY 500 per tonne. Actually, steel demand has been rising since the year start, and no signs of withering have emerged.

    2. Diverged over future trend

    Traders started to pile up stocks amid the general optimism at steel mills. And Mr Hu Quanxing GM of a Nanjing-based trading company said the price upturn can run through the Q3 at least. Mr Hu has stockpiled nearly 1 million tonnes of steel products mainly construction steel.

    Mr Chen Ling said the steel recovery was mainly driven by demand Costs at steel mills have not risen notably in the period. He said that "The steel price uptrend can push through by the year end if the positive policies from Beijing drag on."

    However, a senior official from Handan Iron & Steel Group disagreed with the view. "It’s unconvinced to diagnose as a whole year rise by taking just the second quarter data, since it is the traditional hot season for production and sales and will weaken after it especially in the last quarter."

    The official also said the severe overcapacity stays at the moment, and there is strong possibility for corrections in late market along with the rising prices and reviving production at steel mills.

    Mr Zhang said he also holds a cautious attitude towards future market, "trades are limited though major steel mills are generally raising ex-factory prices. Take billet for example, prices stood at CNY 3,300 per tonne the other day and now edged up to CNY 3,400 per tonne but it might fall again in days to come.

    (Source: Economic Observer)