Despite the ongoing challenges in the steel market, where losses have been a persistent issue, recent first-quarter performance reports are beginning to show signs of hope. As of April 12, four major steel companies have released their financial forecasts for the first quarter, and although they still reported losses, the trend is showing some positive movement.
Industry experts remain cautious, noting that strong iron ore prices, driven by high production levels and inventory pressures, continue to weigh on the sector. The steel industry as a whole remains uncertain about its future outlook.
From Losses to Gains
*ST Angang, one of the companies that recently announced its first-quarter forecast, expects to make a profit of 550 million yuan this quarter, compared to a loss of 1.888 billion yuan in the same period last year. To reverse two consecutive years of losses, the company set a 2013 profit target and started implementing measures in the fourth quarter of last year, including optimizing production plans, resource allocation, and sales strategies. These efforts have led to improved performance, with the company turning a profit in December of last year.
Sangang Shuguang also reported a significant improvement, forecasting a profit between 24.67 million and 25.68 million yuan in the first quarter of 2013, representing a 630% to 660% increase from the previous year. This was attributed to higher revenue and lower costs for key products, which boosted the gross profit margin. Baosteel’s executives mentioned at their annual briefing that while steel prices rebounded in early 2013, rising fuel and mineral prices—up over 50% from last year’s low—kept operating costs high, resulting in generally stable performance during the first quarter.
*ST Steel, which released its quarterly results today, reported a net profit of 34.55 million yuan, marking an 110.41% increase compared to the previous year.
Analysts believe that the recovery in steel prices and reduced costs have played a key role in the turnaround of several listed steel companies in the first quarter of 2013.
Mixed Outlook for the Market
However, the improvement in first-quarter results has not yet signaled a broader industry recovery. According to the China Iron and Steel Association, steel inventories rose sharply in March, reaching 15.565 million tons across five major varieties in 22 cities—a record high. This represents a 22.9% increase from the previous month, with social inventory up 23.8% and port inventory up 14.4%. High inventory levels suggest continued pressure on destocking.
Recent customs data shows that China imported 26.55 million tons of iron ore in March, up 14.4% from the previous month and 2.7% year-on-year. The average import price reached $139.3 per ton, a 7.1% rise from February. For the first three months of 2013, total iron ore imports stood at 184.48 million tons, matching the same period last year, with an average price of $130.1 per ton.
Industry analysts expect demand to remain strong in April, with steel mills unlikely to cut production. Historically, crude steel output is expected to peak in May and June, and iron ore demand is likely to stay high in the second quarter. Import volumes are expected to continue rising, and prices are projected to remain firm.
In terms of steel pricing, Baosteel announced its May price policy on the 11th, with all product lines seeing price increases of 100–200 yuan per ton. After a long period of decline post-Spring Festival, the domestic steel market began stabilizing in late March and early April. As a leading steel producer, Baosteel plays a critical role in maintaining market confidence during this period.
Industry insiders note that other major steel producers are also expected to reduce prices by 100–200 yuan per ton in May. Some products that saw price drops in March may see recovery policies of 200–300 yuan per ton, which could influence short-term market dynamics. However, the medium- to long-term outlook remains challenging due to high production and inventory levels, combined with weak economic trends in March and April. Industrial operations have not met expectations, suggesting that the steel market may face limited upside in the coming months.
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