Cost increases eat up Chinese steelmakers' margins in August

At China's blast furnace steel mills, most of their steel margins were cut in August by higher production costs, especially given the multiyear high prices for imported iron ore, according to Mysteel's latest monthly report.

For rebar, the most popular bar in China, the average margin among 91 selected factories in the country fell 43 yuan per tonne per month to just 25 yuan per tonne on average, according to a study by Mysteel, as the cost of producing molten iron prices at these plants increased by RMB 75 per tonne to RMB 2,480 per tonne excluding VAT last month.

In August, China's imported iron ore prices rose the most among all steelmaking raw materials, and the SEADEX average monthly iron ore price for Australian ore from 62% Fe increased by $ 14.3 per tonne to $ 122 per tonne CFR Qingdao. due in part to severe congestion in Chinese ports, with ships handling iron ore waiting in a long queue for COVID-19 tests, customs clearance and unloading, as reported.

On the other hand, "and also the most important factor (for the higher price of imported iron ore) was the strong demand from Chinese steelmakers as they maintained high production levels last month," said a Shanghai-based insider.

In terms of flat products, the average flat steel margin also fell by RMB 59 per tonne to RMB 89 per tonne, according to the study, as its end users, including shipbuilders, suffered from declining new orders.

Profit from hot rolled coil, however, was the only one of the three grades and flat products to increase by 13 yuan per tonne to 163 yuan per tonne, mainly due to sustained price increases in August, according to a report by Mysteel, there is an increase in demand from car manufacturers and household appliances, infrastructure construction and container production.