China Steel Mills Reel As Product Prices Tumble Faster Than Iron Ore Prices

By comparison, while iron ore futures DCIOcv1 have fallen 17% since May 12, they are still up 1.6% for the month.

Gross profit margin for steel rebar in east China, which broke above 1,000 yuan ($157) per tonne in April, was just 40 yuan a tonne last week, according to CITIC Securities.

Zhuo Guiqiu, an analyst with Jinrui Capital, said some mills in eastern China were booking losses, while producers in the north are also struggling.

He did not specify which mills.

State-backed Hunan Valin Steel 000932.SZ, which is based in central Hunan province, said on Shenzhen’s stock exchange Q&A platform for investors last Thursday: “The fallback in steel prices was larger than that of iron ore. Iron ore prices are still at high levels and have resulted in relatively big pressure on our operations.”

A report from the China Logistics Information Center said that this month’s big swings in steel prices had dented demand from end-users.

For June, it said demand from the construction sector is expected to slow due to the rainy season, while auto production was still being affected by the global shortage in semiconductors.

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