What’s new: Profits at China’s steelmakers declined 72% in 2022 as the industry struggled with sluggish demand from the property sector and rising fossil fuel costs.
Chinese companies engaged in ferrous metals smelting and pressing generated a combined profit of 98.2 billion yuan ($14.4 billion) in 2022, down from a record high of 352.4 billion yuan in 2021, data from the China Iron and Steel Association showed Tuesday. Their combined operating revenue totaled 6.59 trillion yuan last year, down 6.35%.
Steel prices dropped while the costs of coking coal, an essential input, significantly rose, pressing on steelmakers’ profitability.
The China Steel Price Index averaged 122.78 in 2022, down 13.55% from 2021. Coking coal costs increased 24.91%. But import costs of iron ore also dropped 24%, easing steelmakers’ total cost pressure, said He Wenbo, chairman of the China Iron and Steel Association.
The background: The profit decline came amid a drop in investment by property developers in new construction, which accounts for nearly a third of steel demand.
In 2022, China’s home sales fell 24.3% by area from the previous year, and the area of new housing construction plunged 39.4%.
In addition to sluggish real estate, the construction of infrastructure projects such as high-speed rail, subways and highways in China has also slowed, reducing consumption of steel.
Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bob.simison@caixin.com)
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