Economy

Steel industry squeezed by oversupply, rising costs

(Xinhua)
Updated: 2010-10-29 17:39
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BEIJING - China's medium and large iron and steel manufacturers are facing tough times this year, squeezed by market oversupply and increased production costs, the China Iron and Steel Association (CISA) said on Friday.

China's crude steel output in the first three quarters of the year increased 12.7 percent to 474.5 million tons, CISA said in a report on its website.

Crude steel output a day in the nine-month period averaged 1.7 million tons, equivalent to annual production of 634 million tons.

In the period, China was a net exporter of 22.5 million tons of crude steel. In the same period last year, it was a net importer of 1.4 million tons.

Inventory levels at China's 78 large- and medium-sized iron and steel companies peaked in May at 10.5 million tons and had dropped to 9.8 million tons by the end of August.

Steel inventory in the retail sector of 22 large and medium cities stood at 10.7 million tons at the end of August.

The report said the industry's production costs have increased because of higher imported iron ore prices since the beginning of the year.

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The average "landed price" of Chinese iron ore imports was $121.7 a ton, a 56.3 percent year-on-year increase. The landed price, or CIF price, includes costs, insurance and freight.

China's steelmakers paid $55.7 billion for 457.6 million tons of imported iron ore in the nine-month period.

During that period, the volume of iron ore China imported was 11.53 tons less than the same period the previous year but the cost of the ore was $19.2 billion more, the report said.

For the entire steel industry, 77 large and medium iron and steel companies reported a combined profit of 64 billion yuan ($9.6 billion) for the period, an average profit margin of 2.8 percent, well below the country's average industry profit margin.

Some ten of the 77 firms posted combines losses of 2.4 billion yuan in the period.