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Chinese steelmakers reported sharply worsened earnings for the first half of the year amid rising production costs, sluggish demand and falling steel prices.
Angang Steel Company Limited, the public-listed unit of the state-owned Ansteel Group, said its net profit attributable to the parent company is expected to slump 67.37% in the first half of the year from a year earlier to 1.7 billion yuan, according to a stock exchange filing on July 14.
The steelmaker said its production and operation have been facing great challenges amid complex and severe international situation, domestic Covid-19 outbreaks and disrupted supply chain and industry chain.
Prices of major steel-making commodities including coking coal, coal and alloy jumped substantially in the first half from a year ago and iron ore price remained elevated, bringing great pressure to steel production, it said.
Meanwhile, steel demand from downstream industries have been week since March, sending steel prices sliding, it said.
The impacts from raw material purchases and steel product sales significantly squeezed steelmakers’ profit, it said.
Some other steelmakers also booked losses for the first half of the year.
For instance, Anyang Iron and Steel Group Co Ltd said its net loss is expected to book a net loss of 750 – 950 million yuan in the first half, weakening by about 200% from a year earlier.
Liuzhou Iron and Steel Co., Ltd said its net loss is expected to reach 950 million yuan, worsening by 150% from the same period last year.
Xining Special Steel Co.,Ltd expects its net loss to reach 400 – 600 million yuan in the first six months of the year, sliding by 300% – 500 from a year earlier.
Xinjiang Bayi Iron and Steel Co, Ltd expects its first-half net profit to reach about 144 million yuan, sliding by 110% from a year earlier.
Some other steelmakers saw net profit narrow sharply in the first half
For instance, Inner Mongolia Baotou Steel Union Co. Ltd expects to record a net profit of 267 – 400 million yuan in the first half, sliding 86% – 90% from a year earlier.
Guangdong Shaogang Songshan Co., Ltd said that its net profit is expected to slump more than 80% year over year to 200 – 250 million yuan. Chongqing Iron and Steel Company Ltd expects first-half net profit to plunge by about 81% on year to 510 million yuan. Hesteel Co. Ltd expects first-half net profit to drop 30% – 40% from a year earlier to 900 million – 1 billion yuan.
According to data from the National Bureau of Statistics (NBS), profits at China’s ferrous metal smelting industry slumped 64.2% on year in the first half.
Most steelmakers attributed the weak performance in the first half of the year to rising costs, sluggish steel demand and falling steel prices.
The China Steel Price Index (CSPI) compiled by the China Iron and Steel Association hit 122.52 the end of June, sliding 8% from the previous month, picking up by 3.13 percentage points from the previous month and falling month on month for the second consecutive month.
The price index slid by 14.61% from the same period last year, falling year over year for the third straight month, according to the association.
The most-traded steel rebar futures contract on the Shanghai Futures Exchange, for October delivery, hit 3,588 yuan per tonne on July 15, sliding by nearly 20% from the start of the year and diving 33% from the same period last year.
The most-traded hot-rolled coil futures contract on the bourse hit 3,565 yuan per tonne, falling by about 20% year to date and slumping nearly 40% from the same period last year.
Activities in the real estate sector, a major steel consumer, remained sluggish in the first half. According to NBS data, China’s real estate investment fell 5.4% in the first half of the year from the year earlier, new property construction starts declined 2.8%, and real estate developers’ total funding slumped 25.3% on year.
Huatai Futures said in a note on Friday that the struggling real estate market is now facing even more pressure as home buyers across China refuse to pay mortgages for installed properties, which may further weaken market confidence and bring more pressure to developers’ liquidity.
China’s steel market witnessed obvious oversupply in the first half. According to consultancy Mysteel, China’s crude steel output fell by 44.41 million tonnes from a year earlier to 509 million tonnes, down 8% from a year earlier, while crude steel consumption declined by 9% on year to 472 million tonnes.
Due to pressure from weak demand and losses, many steel mills have reduced or suspended production to cut losses. According to Mysteel, in the week ended July 14, China’s weekly steel rebar output reached 2.46 million tonnes, falling by about 90,000 tonnes from the previous week and sliding by 30% or 1.09 million tonnes from a year earlier.
Apparent steel rebar consumption reached 2.98 million tonnes in the week, falling by 67,300 tonnes from the previous week and sliding 17% or 603,900 tonnes from the same period last year, according to Mysteel.