China's steel industry captive of costs
Rising prices of raw materials have made steel manufacturers captive of the once bubbling profits they enjoyed. In 2010, the whole sector saw over 85 billion yuan ($12.84 billion) of profits. And by deducting cash from non-main business investments the figure gets even smaller, 77 billion yuan ($11.63 billion), according to an Economic Information Daily report Wednesday, citing the numbers from a recent working conference.
The report, citing authorities' source, said that in the first 11 months of 2010, the whole industry digested $26.1 billion more in rises of iron ore prices, which is over two times the whole portion the industry got its hands on in the year that just passed.
Average price of the imported iron ore in the first 11 months of 2010 was of $126.4 per ton. In November it had already risen to $145.3 per ton and if the trend only continues a little, rises will plague the industry with over $11.3 billion.
A responsible person from the China Iron and Steel Association (CISA) said that the sales profitability of the steel industry is in the lowest level among all of the countries' industries. Data from the Ministry of Industry and Information Technology (MIIT) showed that average profitability of industries in the country maintains at 6 percent, while the steel industry's touches about a half of that, 3.5 percent.
A source from the CISA said that overall, the steel industry will enter a phase of high costs, high prices and low profitability in 2011. It also predicted that in 2011, the country's steel capacity is expected to increase 5 to 6 percent, and the demand for iron ore will also increase.
