72 major steel mills returned to profitability in May for the first time since last October, according to Chi Jingdong, deputy secretary-general of the China Iron and Steel Association.

Chi said the 72 mills reported an aggregate profit of 1.262 billion yuan (US$184.77 million) in May.

Stable steel prices and increased demand had lifted the steel mill's earnings, Chi said, adding that the government stimulus package, falling inventories, and the surge in fuel prices had halted the fall in the price of steel and boosted producer margins.

The price of steel in the spot market climbed by 3.2 percent last week and was 7.3 percent up over the month. The steel price has been on the rise for 9 successive weeks.

Whether these are short-term gains or the start of a long-term trend remains unclear. Chi Jingdong is conservative on prospects for a sustained increase in prices, pointing out that increased steel output is likely to force the price down.

Furthermore, July is traditionally a slack season for steel sales, with continual rain and intense heat reducing construction activity and, in turn, exerting downward pressure on steel price.

For more information, please see the original coverage in Chinese at:

http://energy.people.com.cn/GB/9555836.html

(China.org.cn by Maverick Chen, June 29, 2009)