Chinese steel mills cut losses in March

According to the China Iron and Steel Association (CISA), China's largest steel mills returned to profit in March, reducing losses in the first quarter to 8.75 billion yuan, or about 1.35 billion euros.

China's operating losses for the metals industry have declined over the past few months. According to earlier CISA information, losses in January and February amounted to 11.4 billion yuan and profit in March was 2.65 billion yuan.

Chinese analysts attribute this to an increase in demand, seasonal activity in the construction sector. Typically, the prospect of a recovery in the construction sector during this period raises the interest of distributors and manufacturers to develop stocks, in particular of rebar.

Steel production rose to 70.65 million tonnes in March, according to CISA, despite the government's efforts to limit overproduction, which stimulates the placement of surpluses in export markets and leads to flooding of cheap steel.

In connection with the increase in demand, prices have increased. The most commonly used rebar was 73 percent higher on April 21 than last December, when it bottomed out. China's average steel price has nearly doubled since the beginning of the year, but remains about 15 percent below its 1994 record.

April 2015 was the worst year for the steel segment in China, according to CISA. Losses to the industry exceeded 100 billion yuan, 15.5 billion dollars, which is 24 times more than in 2014. According to analysts, one should not expect the current trend to continue for a long time. On the contrary, the sooner producers increase production and prices, the more exacerbated the overproduction, which brings prices back to low levels.