The shadow of iron ore price increases: Parts companies are hit by a stick

This year, the ripple effect triggered by the sharp rise in iron ore prices has started to impact "Made in China." When iron ore prices first surged, stock markets of major steelmakers like Baosteel and Shougang dropped sharply, dragging the entire Shanghai market below 1300 points. The Chinese manufacturing sector, which heavily relies on iron ore as a key raw material, found itself under pressure. The industries most affected by rising iron ore and steel prices include shipbuilding, machinery, automotive, and home appliances. Each sector is facing unique challenges due to the increased costs. **Shipbuilding Industry:** At the start of the year, the biggest challenge for the shipbuilding industry was the soaring cost of raw materials. Many shipbuilding orders were placed two years ago, when marine steel prices averaged between $280 and $300 per ton. However, by early this year, steel prices had skyrocketed to $765 per ton, turning previously profitable contracts into losses. According to Ma Zhongpu from the Lang Steel Information Research Center, steel accounts for more than 70% of the raw material costs in shipbuilding, making the situation particularly dire. **Machinery Manufacturing:** The machinery industry is also struggling with the price hikes. Profit margins have dropped significantly compared to previous years. Domestic manufacturers are increasingly reliant on high-value steel products that they cannot fully produce locally, forcing them to import at higher costs. As Ma Zhongpu pointed out, "Products with low technological content will be eliminated." **Automotive Industry:** Although steel costs account for less than 20% of the total cost for automakers, the industry still feels the pressure. Vehicle manufacturers expect component suppliers to absorb the price increases. With intense competition among local suppliers, the rising steel prices have hit them hard. **Appliance Industry:** Steel prices make up about 20% to 30% of variable costs in the household appliance industry. If companies can't pass on the increased costs, a 10% rise in steel prices could reduce net profit margins by 2%. Given the already low-profit margins in this sector, the impact is significant, especially for companies that rely on low-cost expansion and pricing strategies. However, the expected cost pressure on manufacturers did not fully materialize. Instead, the situation reversed due to oversupply in the steel market. By the end of the year, domestic steel prices plummeted, helping the manufacturing sector recover. Wu Xilu, former president of the Iron and Steel Industry Association, suggested boosting steel sales through increased exports of electromechanical products. In this way, China’s manufacturing industry experienced two tough months but ultimately saw a recovery. **Related Topics: Rising Iron Ore Prices – Tracking the Trend**

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