Coke Price Cut Proposal Capped Cost at Steel Mills in February, Rising Steel Prices Continued to Help Recover Profits at Mills

SHANGHAI, Mar 8 (SMM) – In terms of raw materials, domestic blast furnaces resumed production in February, and the demand for iron ore was strong. However, iron ore prices stabilised due to the news of the government’s supervision of iron ore prices and the limitation on the maximum positions of one contract on DCE. At the same time, Australian coal will reportedly enter China, raising expectations that domestic coking coal supply tightness will ease. This triggered further price cut proposal. The cost of steel in February, as estimated by the SMM cost model, has decreased by 51 yuan/mt month-on-month.

Market optimism, combined with improving steel demand, is expected to push steel prices higher.

In February, the average price of steel products rose 69 yuan/mt MoM, with an increase of 44 yuan/mt for rebar, 25 yuan/mt for HRC, and 55 yuan/mt for wire rod. All the three products were profitable.

The prices of galvanised sheets and cold-rolled products rose most significantly, rising by 115 yuan/mt and 89 yuan/mt respectively, but they were still loss-making.

In February, the overall loss of steel products was 70 yuan/mt, which recovered 124 yuan/mt compared with January.

Market optimism about important political meeting session in China, held in March, coupled with the release of demand for downstream real estate and infrastructure construction, will bolster steel prices. On the other hand, iron ore prices may remain high after steel mills resumed production. SMM believes that the recovery of steel mill profits may slow down and steel mills would stand close to the break-even point.