HONG KONG (Interfax-China) -- China produced 263 million tons of crude steel in the first six months of 2008, up 9.6% year-on-year, though the growth rate came in 9.3 percentage points below that recorded for the same period last year, the National Bureau of Statistics reported on July 17.
Steel product output stood at 300 million tons for the first half of this year, up 12.5% year-on-year. The annual growth rate for steel product output showed a similar drop, of 11.4 percentage points, when compared to growth last year.
The NBS said the slowdown in steel product output growth was due mainly to production cuts by small steel mills that cannot afford rising iron ore and coke prices. The growth has also been hedged by falling steel products exports, after the government raised taxes on exports for most steel products to between 10-15% at the beginning of this year.
However, steel product consumption rose strongly between January and June, leading steel product prices to jump sharply over the period. China's steel product consumption rose 16.7% year-on-year while the price of wire, which makes up a significant proportion of steel products made in the country, stood at RMB 5,777 ($845.83) per ton by the end of June, up 62.4% year-on-year.
Rising steel product prices in first half of this year have allowed domestic steel mills to turn a profit of RMB 97.09 billion ($14.22 billion) over the six months, up 25.6% year-on-year, according to the NBS.
The report also predicted that prices for steel product will remain strong in the second half of this year, as reconstruction work in the wake of January and February's snowstorms and the May 12 earthquake will increase demand for steel products. Slowing production and rising production costs will continue to support steel product prices into the remaining months of the year, the NBS said.
The following table details China's preliminary crude steel output figures for the month of June and in the first six months of 2008.
Chinese crude steel output, June 2008
|
Item |
Output, June 2008 (million) |
Monthly change (%) |
Y-o-y change (%) |
Output, January to June (million tons) |
Y-o-y change (%) |
|
Crude steel |
46.94 |
2.02 |
10 |
263.20 |
9.6 |
|
Pig iron |
43.39 |
0.72 |
6.9 |
246.42 |
7.9 |
|
Iron ore |
81.56 |
8.04 |
27 |
391.38 |
26 |
Source: National Bureau of Statistics (NBS)
Note: Monthly change for June is based on figures previously released by NBS
Interfax commentary: China's economy, though still one of the fastest growing economies int he world, is beginning to slow its furious pace. At the same time, the country is seeing progress in reducing an outdated steel production capacity. This will reduce supply, allowing it to better match demand for steel products in H2, even though slowing exports of steel products will enrich domestic market supply to some extent.
A more balanced supply and demand, coupled with surging production costs, will help Chinese steel mills further raise steel product prices.
In the first five months of the year, Chinese steel mills recorded profits of RMB 97.09 billion ($14.24 billion), up 25.6% from last year. The industry as a whole is expected to maintain high profitability this year on strong consumption and high steel product prices.
(c) InterFax-China 2008. For more intelligence on Chinese metals and mining contact David Harman in Hong Kong at david.harman@interfax-news.com.
