November 22, 2008

Shougang output costs to increase by CNY 2.8 billion

Bloomberg reported that Shougang Corp production costs would rise by CNY 2.8 billion in 2008 on higher iron ore prices.

Shougang Corp said in a news letter citing Mr Wang Baomin head of planning and finance that the cost of making one ton of iron jumped 38% to CNY 3,600 in the first half of the year because of higher coal and iron ore prices.

According to the report, Iron ore prices have surged for six years as Chinese demand outpaced global supplies, putting pressure on the profit margins of steelmakers. Steelmakers are trying to push through price increases to carmakers and builders to recover costs.

According to the China Iron and Steel Association production costs may rise further on higher electricity rates and crude oil prices. Shougang is China's seventh largest steelmaker by capacity last year