December 02, 2008

Rising steel price prompts smaller mills to expand output

Escalating raw materials cost has forced small and medium steel mills to cut or suspend production, with their combined output record continuous decline for five straight months since November of 2007. They have accounted for less than 20% of China's crude steel output. However, their crude output jumps 9.02% YoY to 9.75 million tonnes in March 2008.

Market analysts note that a number of smaller mills have resumed production since end of February in light of sharp rise on domestic steel price. In Hebei province, the crude steel output of privately held small mills in February or March has more than doubled the level of last November since the steep steel price enables them to gain some profit after recouping the additional cost. In the mean time, the steel output from leading mills keeps strong growth momentum, hitting a record high of 35.12 million tonnes up by 12.51% from the year before. However, their production share has dropped to 78.27%.

It is reported that China's daily incremental crude steel output has risen 18.86% YoY to 1.45 million tonnes in March up by 9 percentage points from the same time of last year as shown by data from China Iron & Steel Association. National Statistic Bureau data shows that China's newly added crude steel grows 18.49% YoY to 42 million tonnes in March. Meanwhile, the average profit of steel consuming sectors advances more than 35% during January to February much higher than the 12.2% posted in steel sector. This indicates that the spiking steelmaking cost has yet to be effectively passed onto down stream sectors.

(Sourced from MySteel.net)