Profits of Construction Steel Drop Again Following a Brief Rebound

SHANGHAI, Feb 10 (SMM) - In February, the production schedule of construction steel by BF-based steel mills has recovered seasonally, with an average daily increase of 12.6%, which was lower than the level of 15.14% in the same period last year. The prices of finished steel rose more rapidly than raw material cost boosted by the policy end before and after the Chinese New Year, and the profits of steel mills expanded.

However, the demand for construction steel stalled during this period, and the steel mills had to postpone their production scheduling. Afterwards, rebar prices dropped from high after the CNY holiday, and the profits of steel mills fell back to the break-even point, dampening the production enthusiasm of mills. As such, the overall production growth of rebar was less significant than in the same period in previous years.

By regions:

North-east and north-west China: The steel mills suffered great losses between 100-300 yuan/mt. The daily production in the first ten days of February was stable MoM, and most mills plan to resume the production in mid and late February. The daily construction steel output increases palpably on a low base in January.

North China: The losses of steel mills were between 30-150 yuan/mt. The spread between rebar and wire rod narrowed in Shanxi recently, and the profitability of wire rod dropped. Hence some pig iron was used to produce rebar. In addition, two sample steel mills that engage in wire rod carried out maintenance, leading to divergent production changes of rebar (+7.17%) and wire rod (-16.79%).

East China and south-west China: The profitability of steel mills is 50 yuan/mt above or below the break-even point. Construction steel output rose only slightly as downstream demand was slow in reviving.