China’s steel sector profits fall sharply in November
China's steel sector profits fell by 26pc on the month in November, the sharpest month-on-month drop in profits this year.
The steel industry — including primary and secondary producers — made a gross profit of 31bn yuan ($4.52bn) in November compared with Yn42bn in October, according to calculations based on the data from the national bureau of statistics (NBS).
Cumulative January-November gross profits were higher by 50.2pc at Yn386.2bn. Total steelmaking revenues increased by 16pc during this period to Yn6.14 trillion.
China's steel sector profits may shrink next year on the back of slowing demand from the real estate and automobile industries. But an expected uptick in infrastructure investment and progress in the US-China trade dispute could offer support to prices and profit margins.
Steel profits took a sharp fall in November as downstream construction demand slowed because of the onset of winter in north China, while looser winter output restrictions resulted in higher supply compared with last year when output curbs were much tighter.
Domestic steel prices fell by more than 20pc in November.
Domestic prices of hot-rolled coil (HRC) has shown a slight increase so far this month, while rebar prices have fallen by more than 5pc. Steelmaking profits are still quite low, less than half of the levels seen in October and early-November.
Average rebar profits have fallen to Yn300-400/t this month compared with Yn400-500/t last month, although HRC profits have increased to Yn150-200/t compared with Yn20-120/t last month. Wire-rod producers' profits are at Yn300-400/t, while billet producers are making Yn150-250/t in profits.
Mills' profits have improved over the past few days with better cost control. The margin for rebar was at Yn300-400/t in north China, although some mills in south China are making Yn600/t in profits, said a Tangshan-based iron ore trader.
Mills have reduced their iron ore inventories and increased use of low-grade fines and lower-priced medium-grade fines to cut costs.
source: Argus Media
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