Rising prices main contribution to the gains: analyst
China's major steelmakers saw improved profits and contracted losses in the first five months of this year, mainly due to rising prices, analysts said Wednesday.
Large iron and steel firms generated revenue of 8.74 billion yuan in the January-May period, up over 700 percent year-on-year while only 28.28 percent of plants reported losses, a decline of 13.13 percentage points from the same period last year, cnstock.com reported on Wednesday, citing data released by China Iron and Steel Association (CISA).
"Rising prices since November of last year are the main contribution in the increased profits," Wu Chenhui, a Beijing-based independent industry analyst, told the Global Times on Wednesday.
In the first half of 2016, steel prices began to rebound with significant improvement occurring in April, according to a cnstock.com report.
Meanwhile, Liu Zhenjiang, head of CISA, said the firms' efforts to cut overcapacity and stabilize product prices have led to the improvement, according to a Xinhua report on Wednesday.
In the first five months of 2016, total crude steel production registered at 3.3 trillion tons, dropping 1.4 percent year-on-year, as shown in data from the National Development and Reform Commission, China's top economic planner, in June.
China plans to cut crude steel output by 100-150 million tons in the next five years, the State Council said in a statement posted on its website in February.
Another factor behind the profit growth may be rising exports, said Wu, noting China's exports of iron and steel still increased amid anti-dumping investigations by the U.S.
China's exports of iron and steel stood at 46.28 million tons in the first five months of 2016, up 6.4 percent year-on-year, while steel exports in May increased 3.7 percent month-on-month, according to a statement on the CISA website in June.
But China discourages iron and steel exports and has taken measures to control exports, including imposing tariffs on some products, Shen Danyang, spokesperson of the Ministry of Commerce, said Tuesday.
Wu predicts that profits for major steel producers will continue to rise in July because severe winter weather that impacts the iron and steel sector has ended.
