With the three main iron ore miners seeking very big price increases in current iron ore price talks, the Chinese steel industry may face an even more difficult situation in 2010 than last year when the average profit margin among domestic steelmakers was only 2.43 percent.
As stated by a senior official at the information research institute of Chinese steel giant Baosteel, most Chinese steelmakers are pessimistic on the outlook for 2010, although there are some which hold the view that their profit margins may see a slight increase during the year.
According to the Baosteel official, last year Baosteel posted a profit margin of only 7.41 percent, but still ranked first in the Chinese steel industry in terms of profit margin. However, Baosteel foresees a decrease to 6.82 percent in 2010. Beijing-based Shougang also expects a decline, anticipating a profit margin of only 0.79 percent for 2010, compared with 0.93 percent in 2009.
Meanwhile, Hebei-based Tangshan Steel Group's general manager, Yu Yong, commented, "Under the pressures of rising iron ore and coking coal prices, steel producers have no choice but to pass on costs to steel prices." He added that the profit margin may not be higher than last year in spite of the higher steel prices.