SHANGHAI (Interfax-China) -- China's iron and steel industry achieved record high profits in the past year despite rising iron ore prices, the China Iron and Steel Association (CISA) said in a press conference today.
After-tax profits from across the industry topped RMB 190 billion ($26.39 billion) in 2007, a rise of 45% compared with 2006, according to the CISA's figures.
The CISA said that even though most of domestic steel mills experienced a fruitful year, profit margins were heavily squeezed by rising high iron ore prices. The rising raw materials prices drove up product prices, resulting in China's steel product composite price index jumping by 113.49 points over the year, up 8.16% from the previous year.
The average CIF iron ore price in Chinese ports for December 2007 was around $125.28 per tonne, up 81.83% from the same period in 2006, with a peak exceeding $190 per tonne.
Steelmaking costs for Chinese steel mills' grew by 31.05% in 2007 year-on-year. Expansion of Chinese steel production and increasing freight rates sent iron ore prices soaring to breath-taking highs over the year, with the average domestic iron ore price growing 94.15% on an annual basis to RMB 1,179.25 ($163.79) a tonne in December 2007. The growth was also influenced by increasing imported iron ore prices.
In addition, other raw materials, including coal, coke and electricity, experienced price rises. As a result, domestic steelmakers saw their profit margins dropping to as low as 5.63% in December, 1.64 percentage points lower than the year's average.
Nonetheless, the CISA's figures show that over 2007, China consumed 518.83 million tonnes of steel products, of which 501.96 million tonnes were domestically produced. China's steel consumption in 2007 accounted for 43.3% of the world total, which came to 1.1976 billion tonnes, rising 6.8% year-on-year.
Furthermore, the nation produced 489.24 million tonnes crude steel last year, up compared to 2006 by 15.66%, though the growth decelerated by 2.67 percentage points. Chinese crude steel consumption hit 434.36 million tonnes in 2007, up 11.87% from the previous year.
(c) Interfax-China 2007. For more intelligence on Chinese metals and mining, contact David Harman in Hong Kong at david.harman@interfax-news.com or (852) 2537-2262.
