China’s steel industry expected to remain low-profit, Cisa says

China’s steel industry will likely continue to see thin profits over the next few months due to oversupply and steady iron ore prices, China Iron & Steel Assn (Cisa) has forecast.

Cisa member mills made a combined net profit of 149 million yuan ($24 million) in May, a significant year-on-year decrease of 89.38%. May’s profit was also 2.57% lower than April’s and marked a fifth consecutive month of decline, according to the association’s report published on Tuesday July 2.

In January-May, Cisa member mills’ profits totalled 2.837 billion yuan ($459 million), up 33.99% year-on-year. However, the industry’s profit margin averaged only 0.19% and was the lowest among the country’s manufacturing sectors.

Industry insiders said this was not surprising as steelmakers have been squeezed by falling steel prices and relatively steady production costs.

“Actually some mills are already losing money, but they are unlikely to cut production for fear of losing market shares,” a Cisa member mill source told Steel First.

Meanwhile, data released by the Hebei Metallurgical Industry Assn showed that 65 major steelmakers in Hebei – the country’s largest steelmaking province – reported a combined net loss of 99 million yuan ($16 million) in May, compared with April’s net profit of 126 million yuan ($20.4 million).

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