Steel prices diving costs hard Yunnan steel prices are not good days

Many steel companies have already been caught in the production stoppage.

On the one hand, the price of steel products has fallen. On the other hand, raw materials have remained high. Iron and steel companies have fallen into a quagmire of meager profits. “October has been losing money, and in November it was only able to maintain a level,” said a director of a section of Yunnan Yuxi Yukun Iron and Steel Group Co., Ltd.. Although the sharply declining steel prices have eased slightly at present, the meager profits still make it difficult for steel companies to wait until the end of next year or even next year.

Loss of "death"

In the past October, Yunnan Yuxi Yukun Iron and Steel Group Co., Ltd. experienced a loss caused by a sharp drop in steel prices. “On the first day of the National Day holiday, steel prices dropped sharply, and the price of rebar dropped from the previous high of RMB 5,200/tonne to RMB 4,200/ton. The finished products have not yet been produced and have already been lost. "The director of a department of the company said that the workers began to ask privately, "will the steel mill stop production?"

Statistics show that compared with August 19, the steel price at the end of October has decreased by 9.43%, of which, the prices of rebar and hot rolled coil have dropped by 740 yuan/ton and 570 yuan/ton respectively. Major domestic steel mills such as Angang, Wuhan Iron and Steel, Shougang and Shagang have lowered their steel prices in November, but even so, the order price of companies is still higher than the market price, indicating the speed of steel price reduction. Compared with the current ex-factory price of secondary rebars 4280-4380 yuan / ton, most of the steel mills have lost 100-200 yuan / ton.

Director Yang of Yunnan Yuxi Xianfu Iron and Steel Group Co., Ltd. said: “Large companies like us from mining, coking, ironmaking, steelmaking to steel rolling can survive, while those independent steel mills are "In fact, under the background of the declining prices this year, many steel mills across the country have stopped overhauled.

"In order to ensure that the company's more than 5,000 employees work normally, we now insist on production as long as the finished products can be sold, and the funds can be turned around." The above-mentioned sources of Yukun Iron and Steel Group said that their company's stocks are generally maintained for a week. The amount of consumption is that there is too much inventory to occupy the funds.

Raw material prices remain high

Although steel prices have improved compared with October, the price pattern during the fall of steel prices has been different from the past.

“According to past experience, the decline in the price of finished steel products will drive the price of raw materials such as iron ore to fall. However, this year's raw material prices have not only been affected but have also been increased.” Since most of the iron and steel enterprises in Yunnan use mostly local mines, prices have risen slightly.

In addition to iron ore, the price of Yunnan coke also rose slightly. “After the Shizong mine disaster, many local coal mines issued emergency notices requesting production shutdowns and safety rectification. At present, the coal mines in Shizongquan County are almost all in shutdown.” Yang Zhuren said that this makes coke supply very limited and the price increase is also It is inevitable.

Indeed, data from the Yunnan Provincial Commission of Industry and Information Technology indicates that since the second quarter of this year, multiple mine accidents have resulted in a serious coal safety situation in the province. As of the end of August, the province’s coal output was 10,000 tons, only an increase of 2.4%. In this context, the recent coke prices in Yunnan have generally risen by RMB 50/t.

In addition, factors such as tighter electricity supply and higher interest rates have also tested steel companies.

Decline in earnings in December

One side is the decline in the price of steel, while the other is the high cost of raw materials. The data shows that in the third quarter of this year, the sales margin of the iron and steel industry was only 2.2%, which was 0.2 percentage point lower than that in the second quarter and far below the national average of 5.9% in the industrial sector. At the same time, the net profit margin of the average sales revenue of the 31 listed steel companies in the third quarter was only 1.86 percent, the lowest in two years.

In addition, from the perspective of profitability of major steel products, the average profitability of rebar, plate, hot-rolled and cold-rolled steel decreased by RMB 236/tonne compared with the same period of the previous month as of March 3; among them, rebar, plate, and heat The average profit margins for rolling and cold rolling were -337, -414, -313 and -110 yuan/ton, which were 252,309,252 and 131 yuan/ton lower than the same period of last month.

“According to past experience, the next December is the off-season and there will be no increase in demand.” Yang Zhuren’s analysis is subject to the current cost of capital and the outlook for the market, and the demand for winter storage this year will not have much improvement. "It is expected that the iron and steel industry will be in a very severe situation by the end of the year and next year."