SteelOrbis Shanghai
In the morning of July 28,
China Iron and Steel Association (CISA) held the 3rd information release meeting of this year. Luo Bingsheng, Executive Vice President and Secretary-General gave a short summary on the situation of Chinese steel industry in the first six months this year.
I. Steel production maintained a high speed with brisk demand in domestic market
In the first half year, the
production of crude steel totaled 199.4696 million metric tons, up 18.26 percent year on year; that of
pig iron totaled 193.196 million metric tons, up 20.85 percent; that of finished steel totaled 221.95 million metric tons (including double-calculated steel), up 25.78 percent, indicating a high
production speed.
In the first 6 months of the year, the average daily
production of crude steel totaled 1.102 million metric tons, equivalent to 402 million metric tons annual
production, assumed that the average daily figure remains unchanged. Meanwhile the
production registered monthly growth. The average daily
production in January totaled 973,500 metric tons, and that in June rose to 1.2206 million metric tons, equivalent to the annual
production of 446 million metric tons crude steel. If it maintains the daily
production speed of June in the last 6 months, then the total
production of crude steel this year will reach 424 million metric tons, up 20.45 percent year on year.
The brisk demand in domestic market is the major momentum resulting in the high growth in steel
production. The
consumption of crude steel in domestic market totaled 188.4093 million metric tons in the first half year, up 13.25 percent year on year. With the steel mills' inventory and social inventory both at normal level, the market saw overall balance between supply and demand.
In the first half year, the fixed assets investment made by steel industry (excluded mines) amounted to RMB 99.675 billion ($12.1 billion), up 2.3 percent year on year. However, it should be noted that, according the statistics by CISA, the crude steel
production capacity of the whole industry totaled 414 million metric tons by the end of 2005; that of iron totaled 391 million metric tons, and that of rolled steel totaled 420 million metric tons. It is estimated that the newly-added
production capacity for the whole year can reach 23 million metric tons for iron, 25 million metric tons for crude steel and 43 million metric tons for rolled steel.
II. With the optimization of product structure, new achievements have been made in energy saving
Among the 221.9518 million metric tons finished steel manufactured in the first half year, the
production of long products totaled 110.0321 million metric tons, accounting for 49.57 percent, down 0.65 percent year on year; that of flat rolled totaled 88.5856 million metric tons, accounting for 39.91 percent, up 0.17 percent; that of steel
pipe totaled 17.1832 million metric tons, accounting for 7.74 percent, up 0.46 percent. According to CISA's statistics including 76 large- and medium-sized steel enterprises, the comprehensive energy
consumption per ton steel reached 658.56 kg/ton in the first 6 months this year, down 6.62 percent year on year (excluding the coefficient of electricity converting into standard coal); the comprehensive energy
consumption per comparable ton reached 633.01 kg/ton, down 7.25 percent; power
consumption per ton steel reached 452.8 kWh, down 0.36 percent; fresh water
consumption per ton steel reached 6.74 ton, down 20.51 percent, which indicated that new progress was made in energy saving and resources efficiency in the first half year. On the other hand, the total energy
consumption of large- and medium-sized steel enterprises in the first 6 months reached 95.3754 million metric tons, up 8.5995 million metric tons or 9.91 percent year on year.
III. Optimization has been achieved in exported product structure, but there is still a gap between imported and exported product structure
In the first half year, the exports of finished steel amounted to 17.0934 million metric tons, up 47.71 percent year on year; that of semi finished steel amounted to 3.1019 million metric tons, down 35.63 percent. Meanwhile, the imports of finished steel amounted to 9.4113 million metric tons, down 28.81 percent year on year; that of
semis amounted to 212,800 metric tons, down 72.5 percent.
The exports of finished and semi finished steel for the first half year totaled 21.2864 million metric tons in crude steel, and the imports 10.2248 million metric tons, resulting in net exports of 11.0616 million metric tons crude steel, up 8.7683 million metric tons year on year, exerting a great impact on relieving the contradiction between supply and demand in the domestic market.
Among the 9.4113 million metric tons imported finished steel in the first half year, flat rolled amounted to 7.8955 million metric tons, accounting for 83.89 percent; long products 732,200 metric tons, accounting for 7.78 percent; steel
pipe 505,300 metric tons, accounting for 5.37 percent. Among the 17.0934 million metric tons exported finished steel, flat rolled amounted to 7.8484 million metric tons, accounting for 45.91 percent; long products 5.5886 million metric tons, accounting for 32.69 percent; steel
pipe 2.568 million metric tons, accounting for 15.02 percent; steel used for railway 108,200 metric tons, accounting for 0.63 percent. This indicated that, there is an evident gap between the imported and exported steel products for the first half year. With the average CIF price of imported steel at $1,011.33/mt and the average FOB price of exported steel at $554.39/mt, after the
freight, there is a 40 percent price difference between those two.
IV. Steel prices saw recovery rise in the first half year, but recently with minor reduction
According to the statistics of CISA, the steel price index of domestic market rose 21.95 percent from 94.18 in the beginning of the year to 114.85 by the end of June, among which, long products increased by 13.78 percent,
rebar 9.04 percent, medium
plate 36.48 percent, hot rolled thin coil 47.57 percent, and cold rolled thin coil 27.48 percent.
There are several reasons that lead to the price rise in domestic steel market in the first half year. The first is the brisk demand in domestic market. In the first half year, the growth of the three major factors, fixed assets investment, industrial value-added and total exports, resulting in the 13.25 percent growth in
consumption of crude steel in domestic market. The second is the favorable impact of imports and exports in the first half year. The net exports of crude steel in the first half year increased 8.7683 million metric tons compared with the same period last year, which played a great role in relieving the contradiction between demand and supply in the domestic market. The third is the increased demand in international market in the background of recovery of global economy. The global
production growth of crude steel in the first half year is 7.9 percent, and that of blast furnace cast iron 9.2 percent, plus the price increase in steel products. By the end of June, the steel price index in international market rose 25.7 percent to 165.8 compared with that in the beginning of the year, which is the highest in history, among which, that of flat rolled increased 28.41 percent and long products 20.03 percent. The price increase in international steel market influenced the domestic market. The fourth is the cost increase in
manufacturing steel products. The price rise in
iron ore, coal, coke, electricity, and
freight etc. supported the increase in steel prices.
Recently, steel prices in domestic market saw steady decline. Prices of
rebar and
wire rod went down first, followed by medium
plate and hot rolled coil. The overall slight decline indicated that it is the pressing task at present to keep the balance between supply and demand in domestic market and to prevent sharp increase or decrease in the market.
V. With better sales conditions, the mills saw a decline in revenues
In the first half year, 83 large- and medium-sized steel mills achieved RMB 629.94 billion ($78 billion) sales revenue, up 1.65 percent year on year; profits of RMB 35.27 billion ($44 billion), down 30.36 percent year on year.
VI. Domestic iron ore production saw rapid growth, with increased imported ore
In the first half year, the figures released by CISA indicated that the
iron ore production of large and medium mines amounted to 24.55621 million metric tons (low grade), up 6.37223 million metric tons or 35.04 percent, and the total
production amounted to 295 million metric tons if the
production of local medium and small mines is included. Meanwhile, the imported ore totaled 16.1355 million metric tons in the first half year, up 3.01033 million metric tons or 22.94 percent.
In the first 6 months this year, the
pig iron production totaled 19.3196 million metric tons. According to its iron content, the dependency on imported
iron ore is 53 percent.
In the first half year, the recovery rise in steel prices were driven by the brisk demand in domestic market, increased exports and decreased imports in the background of basic balance between supply and demand in domestic market, leading to the growth in steel mills' revenues and better sales conditions. Chinese crude steel
production kept the high growth of 18.26 percent in the first half year, which is basically due to the demand in both domestic and international markets.
On the other hand, the operation situation of steel industry in the first half year also indicated some problems, which may have some influence on the further development. With the crude steel
production for May at 1.1592 million metric tons and for June at 1.2206 million metric tons, the supply is in continuous increase. The growth of steel exports in the first half year reaches 47.71 percent, and that for May is 65.4 percent and for June 101.3 percent. However, the high chance of trade friction with the major export destinations has imposed a new pressure on future steel exports.