China major steel mills profit in 9 months dips by 78pct YoY
Thursday, 05 Nov 2009
China Securities Journal cited Mr Luo Bingsheng Vice chairman of China Iron & Steel Association as saying that 70 large and medium steelmakers have achieved profits of CNY 29.978 billion during January to September decline by 77.65%YoY and CNY 28.253 billion in the single Q3 down by 7.06%YoY.
He believed that the high speed growth of crude steel output has magnified supply & demand contradiction, sending steel market to face high inventory pressure.
Mr Zhou Tao another steel industry analyst with Sinolink Securities said that steel industry may warm up next April due to the traditional consumption peak season comes with eased inventory pressure and a rise in operation rate.
1. Five month Continuous Profit Growth in Steel Industry during May to September
The total sales revenue of 70 large and medium mills comes at CNY 1555.368 billion in January to September 2009 down by 24.93%YoY with profit tax of CNY 84.611 billion decline of 62.55%YoY.
In fact, the profit loss stands at CNY 5.607 billion in total during January to April with profits of CNY 35.585 billion from May to September so they gained CNY 29.978 billion during January to September and there were 10 mills achieving profit loss in the period, covering 14.29% of the total up by 4.29%YoY.
As per the statistics from Wind there are 33 domestic listing steel companies realizing profits of CNY 13.76 billion declining by 21.2%YoY.
2. Inventory Pressure to be enlarged in Q4 2009
Although the steel market eyed a substantial improvement in Q3, Mr Luo insists that China’s steel industry may face more challenges which falls into two flows, high output and high inventory.
An analyst Xu Xiangchun with Mysteel unveiled that the domestic total stocks of construction steel, HRC, CRC and medium plate are posted at 11.44 million tonne by October 30th down by 0.57 million tonnes compared with 10 days ago.
Besides CISA data shows total steel inventory in China 26 large and medium cities arrived at 11.13 million tonne by the end of September up by 5.3 million tonne by 90.9% from the year start meanwhile, steel and billet inventory of 68 large and medium steelmakers recorded at 11.548 million tonne up by 14.26%.
Due to the continuous increasing social inventory, China steel market price will slide further with enlarged profit losses. And steel industry will face more challenges in the following Q4 and next year start.
3. Chances of Investment Perhaps Appear in April Next Year
It’s generally believed that Spring Festival is the traditional peak season for steel products consumption, with a previous rise in estate industry, also boosting demand to mount up.
At present, demand for flats products begins to warm up, especially in the fields of auto and household electrical appliance industries etc, which would not arouse structure investments in steel industry.
