Ye Feng

According to statistics lately released by the China Iron and Steel Association, 25 of the 72 large and medium-sized iron and steel enterprises were running in the red in the first quarter of this year, with the coverage reaching 34.72%, which was 23.61 percentage points higher than that of the same period last year. Some iron and steel companies are still making profits, but their profit margins have narrowed remarkably. According to statistics of the 72 large and medium-sized iron and steel enterprises under the survey of the association, their sales revenue of products was RMB449.95 billion in the first quarter, plunging 21.74% from the last year quarter, and profits, RMB12.363 billion, falling 83.07%. The industry made across-the-board losses of RMB3.308 billion after breaking even, a sharp contrast with the RMB44.16 billion profits in the same period last year.

Under the weary market demand, the iron and steel output still remained high, with the total supply continuing to increase; which were the main factors causing the market oversupply in China in the first quarter. According to statistics, China turned out raw steel amounting to 127.4435 million tons in the first quarter of this year, an increase of 1.7492 million tons or 1.39% year on year; and pig iron, 122.3758 million tons, rising 5.039 million tons or 4.29%. The average daily output of raw steel was 1.416 million tons, equivalent to an annual output of 517 million tons. The aggregate level has demonstrated an upward turn month by month.

In the first quarter, China's output of steel products reached 144.7289 million tons, up 3.9058 million tons or 2.77% year on year. Based on the calendar days, the year on year increase was 5.5131 millions tons or 3.92%. Of this, output of long steel materials was 69.2612 million tons in the first quarter, up 9.9% year on year; output of pipe, 10.7336 million tons, up 10.71%; rail materials, 1.4845 million tons, up 45.2%; plate (excluding belt), 50.6973 million tons, down 7.68%; and narrow belt steel, 10.0952 million tons, down 2.33%.

The apparent consumption of raw steel (available sources for supply) was 126.3237 million tons on the domestic market in the first quarter, rising 8.3417 million tons or 7.08% year on year, averaging 1.4036 million tons a day, equivalent to an annual apparent consumption of 512 million tons for the whole year.

In the first quarter, China's prices of steel products made across-the-board drops. The comprehensive price index of steel products on the market was 97.59 point at the end of March, down 31.42% year on year. Of this, the price index of long steel materials fell 31.81%; plate price index went down 32.42%, which was 5.53% lower than the end of last year; the price index of long materials declined 8.36%, the plate price index down 4.6%. The present steel product price has touched a level lower than that of 1994.

Under the negative impact of the weakening demand on the international steel market, China exported 5.1367 million tons of steel products in the first quarter, down 54.85% year on year; steel billet, 2,100 tons, down 97.67%; steel products and steel billet equivalent to crude steel, 5.4667 million tons, down 55.16%. The country imported 3.2316 million tons in the first quarter, down 22.41%; steel billet, 909,000 tons, increasing 859,300 tons or 17.29 times; and steel products and steel billet equivalent to crude steel, 4.3469 million tons, down 2.98% year on year. The country posed a net export of crude steel of 1.1198 million tons in the first quarter after going even, declining 85.48% year on year. The reduction part of the net export of steel products and steel billet, which were exported to other countries and regions, turned to the domestic market in the first three months, accounting for 79.03% of the increased 8.3417 million tons of apparent consumption of crude steel on the domestic market in the period. This is an important reason leading to the oversupply on the domestic market.

The average FOB price of steel product exports was US$1,150.99/ton in the first quarter, surging 32.16% year on year; and the average CAF price of imports was US$1,310.14/ton, up 1.5%, leaving a price gap between the two of US$159.15/ton, with a difference of 12.15%, which was 15.26 percentage points smaller than the average price last year.

At the same time, China's import of iron ore reached 131.5253 million tons, rising 18.85% year on year, including 52.0802 million tons of imports made in March, a new monthly high in the import, and surging 45.96% year on year. The average CAF (including cost and freight value) price of iron ore imports stood at US$80.47/ton, dipping 38.57% year on year.