It is reported that more than 200,000 steel traders, most of which are small and medium sized have lost capital due to severe inflation in China and high import price of iron ores.

Industrial participants hold that the continuous price rise of raw materials and labors hovering ex works steel prices and tight monetary policy caused by inflation and record high CPI, loaded more capital pressure on steel traders and squeezed their profit margin further comparing to the same order normally.

A steel trader complained that "We hardly make any money."

A manager from a steel trading company said "The climbing of production cost threw us in hot water not only some major steel companies."

Mr Cao Jinghui deputy manager of Beijing Jiahua steel trade Co Ltd said "The blurred outlook resulted from currently fluctuating steel prices forced us to cut prices and consume stockpiles just to get rid of losses."

Some steel traders resort to usury or chamber of commerce guaranteed loan or even hedging in steel futures market to pull through the difficulty. However, Mr Xie Cai a researcher in Development Research Center warned that these methods would bring more risks and higher capital costs to steel traders.

In overseas market, the import price of iron ore in H1 this year averaged at USD 160.89 CIF per tonne up by 42.4%YoY hitting the record high with the total cost of steel industry increasing CNY 104.11 billion. It was estimated that the overall 54.55 million tonnes of imported iron ore in July priced at USD 173.2 per tonne averagely still running at high level.

(Sourced from MySteel.net)
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