It is reported that losses for Chinese steelmakers are worsening, and China Iron & Steel Association said that losses for 72 large and medium sized steel firms posted at CNY 1.87 billion in April with mills posting red ink increased by 4 from March.
The steel association said the low steel price is the main reason behind the loss, since it has fallen to 1994 levels. And insiders have diverged over the price trend in future.
1. Mills Suffer CNY 1.87 billion loss in April
Mr Luo Bingsheng vice-chairman of CISA said Chinese steel mills suffered a combined loss of CNY 5.179 billion in the first four months of this year versus the nice gain of CNY 63.401 billion in the corresponding period of last year. He said that totaling 29 steel producers have incurred losses in the month up 4 mills from the month before. And Baosteel president speculated at last weekend that China mills may post loss for whole 2009 in light of the persisting excessive supply.
2. Steel Prices touch new low
Mr Luo said China’s composite steel price index posts at 95.56 by late April off 34.76% or 50.92 from 146.48 posted by the end of April 2008. He said that “The overall price trend is heading downward.”
And according to the vice chairman the mounting up supply is the root cause for the supply outstripping demand amid the faltering consumption.
3. Prices May Move up later amid Demand Pickup
Mr Luo said despite the low steel prices, Mr Luo still holds a bright view about future trend. China’s steel prices would claw back some losses amid the picking up demand stimulated by Beijing’s economic recovery packages.
Mr Li Xinchuang from China Metallurgical Industry Planning & Research Institute said “Beijing’s efforts have taken effects, this coupled with the midseason in May and June would push up steel demand considerably in future.”
CISA data shows the apparent crude steel usage in the first four months posted at 170 million tonnes up by 6.92% or 11.03 million tonnes from a year ago.
Mr Nie Xiuxin analyst from Ping’an Securities noted that “Monthly apparent steel use in March and April is 10 million tonnes higher than that in February reflecting the picking up of down-steam demand.”
He said that “The high stocks pressure was also eased by the rising demand, with inventories at steel mills by late Mar registering at 8.25 million tonnes down 0.9% from last month and making up 26.2% of total production.” The figure is approaching normal levels.
Mr Xu Xiangchun senior analyst of Mysteel.com said it is merely a midseason driven demand rebound, and it is not confined to pick up in the second half. He said that “Steel prices would linger at low levels in late market since there is no upward momentum for prices to head upward.”
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