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80 Chinese steelmakers profit margin below deposit rate

Mr Luo Bingsheng deputy chairman of China Iron & Steel Association said that the sales profit rate of 80 large and medium steel mills included in the association statistics only reaches 2.91% a continuous decrease of 0.67% from a year earlier.

He said “The steel industry is in a state of high cost and low profits. This means steelmakers’ return on product sales is less than bank interest returns.”

Mr Luo said that overall production and sale costs of the 80 large and medium steel mills surged 25% in the previous five months with profits of CNY 42.8 billion and sales profit rate at 2.91%, due to the skyrocketing of imported iron ore prices.

Mr Luo Bingsheng pointed out that steel industry should focus on cost control and operational efficiency.

One of the main causes for this is the soaring imported iron ore prices. Iron ore prices mainly depend on iron ore price indexes which are handled by foreign institutions.

Mr Luo Bingsheng expressed that China will certainly enact its own iron ore price index. He said the index will be rolled out within the year.

China domestic iron ore output increase and iron ore inventory at ports also hits a high level of 90 million tonnes. Mr Luo expected iron ore demand to decline with overall iron ore price entering a downward track in second half of this year, in light of an oversupply in global crude steel output.

Sourced from MySteel.net

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