Chinese crude steel output rose 2.4% during Q1 of 2014, according to figures released by the National Bureau of Statistics. The crude steel output of China’s major steelmakers rose 3.5% year-on-year, according to the China Iron and Steel Association (CISA).

However, the operational revenue of China’s 35 listed steelmakers dropped 2.56% year-on-year due to sliding steel prices. Hot rolled coil, for example, and rebar dropped 150 to 200 yuan/tonne from the beginning of the year.

Operational costs dropped too, by 4.5% year-on-year due to price slumps in raw materials such as coke and iron ore. Metallurgical coke prices dropped 100 yuan/tonne and homegrown iron ore prices dipped 200 yuan/tonne since the beginning of the 2014. Imported iron ore dropped US$30/tonne, according to Lange steel.

Following two years of losses in 2011 and 2012, China’s 35 listed steelmakers turned a profit of 7.3 billion yuan in 2013, but witnessed a profits slide of 1.1 billion yuan during Q1. Fifteen of the 35 were in the red while 19 saw net profits decline.

Statistics released by CISA show that large and mid-sized steelmakers achieved total sales revenues of 868.8 billion yuan during Q1 2014 and net losses of 2.3 billion yuan. During the same period in 2013 net profits were 7.9 billion yuan.

During Q1 2014, the cash flow of China’s 35 listed steelmakers dropped to its lowest level since Q4 2011.

Profitability is expected to remain weak during Q2 2014 as a declining Chinese housing market weakens demand for steel.

Source: China Metals.