Steel demand is being fuelled by a global revival of industrial production, with JP Morgan’s global manufacturing purchasing managers’ index touching a 21-month peak in August, and rising sales in the key auto sector.
Despite the revival in steel prices, company margins are still suffering due to high costs, especially of iron ore. Spot prices of the raw material SH-CCN-IRNOR62 are hovering at the highest levels since January 2014.
Profitability in China is also under pressure.
“Spot domestic margins are showing signs of compression as softer pricing is being compounded by rising raw material costs,” Jefferies analyst Alan Spence said in a note.
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