The China Iron and Steel Association (CISA) has held its fourth industry information press conference of 2007 at the end of October. At the conference the CISA gave its official analysis of and made comments on China's steel market in 2007. Regarding the problems existing in the steel industry, the CISA has put forward definite plans and measures and showed determination in their implementation. The major points expressed by the CISA are summarized as follows:
Output and exports continue to increase but growth rate drops remarkably
In the January-September 2007 period, China's crude steel output was 362.73 million mt, up 17.61 percent compared to the same period of 2006. However, the output growth rate indicated a continual downward trend: the year-on-year growth rate of monthly output was 26.08 percent in January; by September this figure had dropped to 17.47 percent.
Export figures indicated a similar trend. Following China's measures to restrict its exports, the desired results began to appear in recent months. In April, the year-on-year steel export growth rate was 146.48 percent; however, in August and September the figure dropped to 39.53 and 9.14 percent respectively.
Raw material prices remain high and steelmakers' profits continue to go down
During the first nine months of the current year, supplies of local and imported iron ore totaled 505.47 million mt and 284.03 million mt, up 22.9 and 14.94 percent year on year respectively. For the first nine months the average CIF price in China for imported iron ore was $79.72/mt, up 27.06 and 31.95 percent compared to the same period of last year and to January 2007, respectively. In September alone, the average CIF figure for imported iron ore was $91.11/mt. Undoubtedly, the remarkable price hike in shipping costs has been the main contributing factor to the increase in imported iron ore prices.
The latest data indicate that the average purchase price for inland iron ore of the local big and middle-sized steelmakers reached RMB 906/mt ($120/mt) in September, up 63.58 and 49.04 percent compared to last year and January respectively.
Due to the rise in costs, the profit level of the local big and middle-sized steelmakers has slipped down. In March, the average profit rate was around 9.65 percent and has dropped month by month since then. In September, the figure was only 6.79 percent, down 2.86 percent compared to March, and constituting the lowest monthly level in 2007.
Steel prices rise steadily and steel product structure is being further optimized
The local comprehensive price index for steel was 115.14 at the end of September, up 9.5 percent compared to the beginning of 2007. The figure for long products and flat products was up 23.23 and 5.87 percent respectively. Meanwhile, the figure for the international steel market was 170.4 at the end of September, up 13.45 percent. The increase margin in the local steel market perfectly matches the change seen internationally.
During the period in question, the changes in steel product structure have been in line with the state's requirements for the steel industry. High value-added and high technology steel products are claiming a greater share of total production. For example, during the first nine months, the output of high-end CR steel sheet was 24.55 million mt, up 32.76 percent year on year; galvanized sheet output totaled 15.08 million mt, up 51.9 percent; pre-painted steel sheet amounted to 2.37 million mt, up 39.5 percent; while electrical steel sheet output totaled 3.04 million mt, up 22 percent.