SteelOrbis Shanghai
Although Chinese iron and steel companies continued to grow throughout January-September 2007, the growth rate dropped considerably compared to last year.
In September this year, the growth rate of Chinese steel production registered a slowdown, while exports declined quarter on quarter. However, with the high levels of steel prices, supply and demand in the domestic steel market in September basically remained in equilibrium; at the same time, the cost and turnover of large and medium-sized metallurgical enterprises remained essentially unchanged compared to August. Meanwhile in the third quarter, the return on investments increased slightly due to greater cost effectiveness in production.
From January to September 2007, steel producers' main economic indicators, such as production value, turnover, earnings before interest and taxes, and net profits, continued to increase compared to the same period of last year; however, the growth rates remained on a steady downward trend. Although capital utilization for finished goods, accounts receivable and accounts payable, increased year on year, the increase only brought them up to the normal industrial levels.
1. Production value kept on increasing, while turnover remained basically unchanged from the previous month.
In September, large and medium-sized metallurgical, ferroalloy and steelmaking enterprises achieved a gross industrial production value (current value) of RMB 155.8240 billion ($20.9160 billion) - up RMB 7.086 billion ($951 million) or 4.76 percent compared to August. Meanwhile, sales revenues amounted to RMB 177.8840 billion ($23.8770 billion), basically unchanged from August. Of these enterprises, steelmaking companies achieved a gross industrial production value (current value) of RMB 152.6070 billion ($20.4840 billion) - up RMB 7.1360 billion ($958 million) or 4.91 percent compared to the previous month, and a sales turnover of RMB 174.7850 billion ($23.4610 billion), basically unchanged from August.
In January-September 2007, total industrial revenues of large and medium-sized metallurgical, ferroalloy and steelmaking enterprises reached (current value) RMB 1,283.3070 billion ($172.2560 billion) - up 31.90 percent year on year, which was 2.93 percentage points higher than the increase rate for January-August 2007. Sales revenues reached RMB 1,458.2150 billion ($195.7330 billion) - up 35.02 percent year on year, which was 0.85 percentage points lower than the growth rate for January-August 2007. Of these enterprises, steelmaking companies achieved a gross industrial output value (current price) of RMB 1,258.4150 billion ($168.9150 billion) - up 31.64 percent year on year, while their sales turnover reached RMB1,433.3090 billion ($192.39 billion) - up 35.10 percent year on year; both of these growth rates were lower than in January-August 2007.
2. In the third quarter, return on investment, profits and earnings before interest, and net profits rose slightly compared to the second quarter.
In September, large and medium-sized metallurgical, ferroalloy and steelmaking enterprises achieved total profits of RMB 12.1140 billion ($1.6260 billion) - up RMB 775 million ($104 million) or 6.83 percent compared to August. Of these enterprises, steelmaking companies achieved total profits of RMB 11.867 billion ($1.5930 billion) - up RMB 868 million ($117 million) or 7.89 percent compared to August. The profits of 52 steelmakers increased quarter on quarter while the profits of 41 steelmakers declined quarter on quarter. The main reasons for profit decline were decreases in turnover or rises in costs and fees.
In January-September 2007, large and medium-sized metallurgical, ferroalloy and steelmaking enterprises achieved total profits of RMB 115.3240 billion ($15.48 billion), up 69.76 percent year on year; of this total, steelmaking enterprises alone achieved profits of RMB 113.3090 billion ($15.2090 billion), up 69.45 percent year on year which is lower than the increase rate for January-August.
In the period from January to September, with regard to large and medium-sized steelmaking enterprises, the main business gross profit margin was 12.10 percent, up 0.87 percentage points year on year; the rate of return on sales was 7.91 percent - up 1.90 percentage points year on year; and the net profit margin was 8.55 percent, up 1.82 percentage points year on year. Each of these above-mentioned indicators maintained a relatively high growth rate compared to last year.
In January-September 2007, 72 large and medium-sized steelmaking enterprises registered a growth in their profits year on year, these companies constituting 76.60 percent of large and medium-sized steelmaking steel producers. Meanwhile, the profits of seven large and medium-sized steel enterprises declined year on year, accounting for 7.45 percent of such enterprises; on the other hand, seven producers managed to switch from a loss-making situation to a profit-making one. In September, the top 20 profit-making steel enterprises achieved combined profits of RMB 9.4160 billion ($1.2640 billion), accounting for 77.73 percent of the total profits made by large and medium-sized steel enterprises - 8.59 percent higher than in August. The total profits achieved in January-September 2007 reached RMB 93.0410 billion ($12.4890 billion), up 73.81 percent year on year.
21 steel enterprises with annual production capacities of over five million mt achieved profits of RMB 8.4110 billion ($1.1290 billion) in September, accounting for 69.43 percent of the total profits made by large and medium-sized steel producers in China. This share is 5.11 percentage points higher than in August. The total profits of these mills through January-September 2007 reached RMB 88.3160 billion ($11.8540 billion), up 72.26 percent year on year. In September, nine steel enterprises with production capacities of over 10 million mt achieved a total profit of RMB 5.5550 billion ($746 million) in September, 2.36 percent lower than August. With this figure, the total profits obtained during January-September reached RMB 68.0230 billion ($9.1310 billion), up 71.61 percent year on year. The profit growth rate compared to January-September 2006 of steelmakers with production capacities exceeding 10 million mt was lower than that of producers with production capacities of below five million mt.
3. In September the number of loss-generating steel enterprises remained the same as in the previous month, but the total quantity of losses increased
In September, all but four steelmaking enterprises achieved profits. There were also four loss-making steel producers in August; however, the total amount of losses increased 2.56 million RMB ($343,600) or 48.48 percent to RMB 7.84 million ($1.05 million) compared to August.
In January-September 2007, there were six loss-generating steel producers in total, which is seven less compared with the same period of last year. The total amount of losses incurred was RMB 124 million ($17 million), down 63.83 percent year on year.