December 29, 2008-- The country's main steel plants posted a loss of 12.77 billion yuan (1.87 billion U.S. dollars) in November, the second monthly net loss after October, according to the latest data released by China Iron and Steel Association (CISA) on Monday.

 

In the month, 48 out of the 71 steel makers were in the red, with a combined loss at 14 billion yuan. The number climbed from 42 in October, when losses were recorded at a combined 5.8 billion yuan.

 

Analysts attributed the loss to the high prices of raw materials the steel companies had purchased.

 

CISA vice secretary general Qi Xiangdong said the first six months saw price hikes of iron ore, coal, coke and crude oil, which led to a 70 percent rise in steel prices over the same period last year.

 

He said steel prices plunged since September and fell to 1994 levels.

 

"At present, price relations among steel and other steel-related sectors are twisted," he added.

 

Analysts said December's picture would be just as dismal, despite a 20 percent rise in iron ore spot prices.

 

From May to November, the spot price of iron ore fell due to weak demand. In October, the spot price fell below the long-term contract price for the first time in 7 years.

 

Hu Kai, an iron ore analyst with Umetal.com, said given that the port inventories of iron ore may fall to 64 million tonnes, the impairment losses of steel mills and traders would hit 25 to 30 billion yuan, if 60 percent of iron are bought at long-term contract iron price and the rest at spot price.

 

Nanjing Securities said steel producers would suffer losses in the fourth quarter as they hadn't consumed all the high-priced materials and property sector and auto industry were slacking. Impairment losses would also worsen.

 

Qi said the 10 stimulus measures carried out by the State Council, or Cabinet, would be expected to boost steel demand.