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Chinese steel HRC producers face losses

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Chinese steel HRC producers face losses
Latest company news about Chinese steel HRC producers face losses

A Tangshan-based HRC producer reported a loss of 100 yuan/t ($14.50/t) yesterday, while most steel mills reported profit margins of Yn20-120/t. HRC margins were at Yn700-800/t in the first week of November and around Yn1,200/t in October.

HRC prices have been falling since 10 September, with the Argus-assessed ex-warehouse price for Shanghai HRC down by around Yn600/t or 16pc. Shanghai HRC prices in November alone have fallen by Yn300/t or 5.5pc. Prices for iron ore and coking have also been steadier to pinch profit margins.

"The fall in iron ore prices have been much smaller than those in steel prices, which is pushing HRC producers towards making losses," a Hebei-based mill manager said.

HRC — the basic raw material for several types of flat products — typically trades higher than rebar, the most widely traded construction steel product. But Argus-assessed Chinese domestic rebar price overtook HRC prices on 10 August and has since held on to the premium. The Shanghai ex-works rebar price was around 10pc higher than the HRC price on 20 November. Production costs for HRC are around Yn20-50/t higher than rebar.

A slower pace of automobile production has hit demand for HRC, which is processed to create auto-grade steel used as panels in cars, trucks and buses. Automobile output in China fell by 0.7pc from a year earlier in October, while January-October growth was around 6.9pc compared with 12pc in 2017. Manufacturing growth of other key flat steel-using industries have also slowed this year, with shipbuilding, aerospace and other transportation equipment growing by 2.8pc during January-October compared with 6.2pc in 2017. General machinery manufacturing growth was 7.4pc in January-October compared with 10.5pc in 2017.

Profit margins of construction and semi-finished steel products have also been sharply eroded over the past two weeks.

Billet prices were trading close to production costs, which could make more mills divert crude steel away to producing rebar rather than billet to boost profits. Production costs of billet are typically around Yn3,225/t, which translates to a gross profit of Yn225/t based on yesterday's Tangshan billet price of Yn3,450/t.

Rebar continues to remain the most profitable among the basic steel products, with margins currently at around Yn500/t, sharply lower from Yn800-1,200/t in the first week of November. The Shanghai domestic ex-works rebar price was at Yn4,200/t on Tuesday, down by 10pc since the start of the month. Seasonal stocking of rebar in the winter months by trading firms and downstream buyers has not emerged yet as buyers are balking at stocking up at prices higher than Yn4,000/t. But a dip beyond Yn4,000/t could encourage buying as construction activity in China remains robust. Seasonally construction slows in winter months but the extent of slowdown has been marginal since 2016.

Pub Time : 2018-11-22 10:51:24 >> News list
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