China’s Baosteel raised the prices of HRC and other plate products by CNY200/mt ($28.9/mt) for September shipments. The prices of CR coils were increased by CNY260/mt ($37.57/mt). This the fourth successive monthly price hike by the steelmaker which it attributes to a sharp rise in iron ore prices.
Steel demand remains bullish in China and prices of all steel products have risen sharply in the domestic market, however, there has been a limited impact of these price hikes on Asian and other international markets. Steel importing countries are still awaiting for end-user demand to pick up post the COVID-19 crisis.
Iron ore at 6-year high
Iron ore import prices rose by around 35pc in China since early 2020. Australian 62pc Fe content ore traded at $128/mt cfr China, a six-year high. Increased crude steel production in China post the pandemic and concerns of supply disruptions from mines in Brazil and Australian drove ore prices higher in the first half of 2020.
The average price for iron ore was $90.5/mt cfr China in May which rose by $10/mt in a month to $100.9/mt cfr China in June and at then to $105.3/mt cfr eastern China in July, according to Baosteel.
Margins squeeze
Though Baosteel remains upbeat about downstream industry demand in the second half of 2020. It is unlikely to boost the company’s profitability amid a limited rise in exports and domestic steel prices from the prior year. A sharp rise in input costs is pressuring margins. Major steelmakers in South Korea also await pick up in domestic demand. Although steelmakers are attempting to raise prices, improvement in profitability is likely to be limited, given the cost increases.