Large and medium-sized steelmakers incurred a total loss of 548 million yuan in February, extending the loss for the first two months to 2.8 billion yuan, reports Economic Information Daily, citing the China Iron and Steel Association.
The steelmakers reported negative profit margin of 0.19 percent in February, bringing the negative profit margin for the first two months to 0.51 percent.
Thirty-four steelmakers, or 42.5 percent of the total, incurred losses in February, said an unnamed source.
Xu Xiangchun, head of the consulting department at Mysteel.com, attributed the industry-wide losses to weak downstream demand and high raw material costs.
According to the China Iron and Steel Association, steelmakers had 10.77 million tons of inventory in the first half of March.
The inventory depletion was low as only 880,000 tons of inventory were used up in the five weeks since February 15, less than the normal amount in recent years, according to Mysteel.com data.
Xu said steel prices fell more rapidly than production costs. For example, steel prices in January and February fell 12 percent from a year ago, while costs decreased by only nine percent.
A source at a large steelmaker in Hebei said the high coking coal, power, iron ore, and financing costs, squeezed profitability and resulted in steelmakers suffering from a severe cash crunch.
Since the end of 2011, a number of steelmakers had started to reduce their procurement of iron ore, and conducted equipment repairs.
Seventeen listed steelmakers, including Angang Steel (000898) and Shandong Iron and Steel (600022), realized 2011 net profit of only 3.74 billion yuan, a drop of 59 percent, despite a 15 percent growth in revenue to 457.6 billion yuan.
The 17 steelmakers recorded an average gross profit margin of only 9.22 percent, further dropping from 2010, with 12 of the 17 posting ratios of less than 10 percent.
Source: Capital Vue