According to data issued by the China Iron and Steel Association (CISA), in the first nine months of this year the average pre-tax profit margin of Chinese domestic large and medium sized steel enterprises was 2.84 percent. In September, the margin was just 1.16 percent, down from 1.45 percent in August. The above percentage margins are far below the average pre-tax profit margin for domestic manufacturing industries in the January-September period, i.e., five percent.
Compared with an average pre-tax profit margin of 6.8 percent in 2008, in the context of the global financial crisis the average pre-tax profit margin of major steel enterprises worldwide was 3.9 percent in 2009, though some international steel companies achieved margins just above 10 percent.
The shrinkage of profit margins has mainly been attributed to higher raw material costs for Chinese steel producers. As CISA vice president Luo Bingsheng remarked, in the January-September period this year the average import price of iron ore was $121.7/mt CFR China, up 43.84 percent year on year.
Mr Luo stated that during the period of China's 12th five-year plan period (2011-15) one of the main points of focus for the local steel industry will be the improvement of profitability for the sector.