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The State Information Center predicted in its report that due to the upcoming 71.5% price hike of imported iron ore in April, China's steel producers would face increasing pressure to increase their prices. Small and medium-sized companies would be the biggest victims.
According to this report, China's steel producers shoulder a total additional cost of 20 billion to 30 billion yuan, accounting for 20% to 30% of the steel industry's total profit. Small and medium-sized steel makers and other steel-related enterprises such as machine, ship car and container manufacturers would be in bigger risk of profit decline.
China currently has a vigorous demand for steel, particularly high quality steel sheets. Domestic steel prices are still lower than those of the international market. Therefore, several large producers with advanced technologies are able to produce more top-grade goods and avoid big losses by raising their steel prices, and successfully shifting the risks of cost hikes to other steel-related enterprises. However, most of China's small and medium-sized steel makers, weak in finance and risk management, mainly produce low-grade steel for architectural use; they have to bear profit losses instead of shifting the cost hikes to their customers.
(Chinanews.cn March 26, 2005)
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