China’s industrial profit growth slows in April amid high commodity prices

BEIJING (Reuters) – Gains by Chinese industrial companies rose at a slower pace in April, with high commodity prices and weaker performance in the consumer goods sector limiting the overall profitability of the manufacturing sector.

FILE PHOTO: Workers wearing face masks following the coronavirus (COVID-19) outbreak load steel products for export to a freighter at a port in Lianyungang, Jiangsu province, China, May 27 2020. China Daily via REUTERS

Profits of Chinese industrial companies rose 57 percent year-over-year in April to 768.63 billion yuan ($ 120.22 billion), from 92.3 percent in March, according to data from the National Bureau of Statistics (NBS) Thursday.

For the January-April period, industrial company profits rose 106% from the same period a year earlier to 2.59 trillion yuan, supported by a drop in virus-related activity at the start of the year. last year.

“The improvement in company performance is still uneven,” NBS official Zhu Hong said in a statement accompanying the data.

“The profitability of some consumer goods industries has not yet recovered to its pre-epidemic level; together with the high prices of bulk products, this has increased pressure on the production and operation of intermediate and downstream industries. “

Chemicals and metals processors recorded some of the highest year-over-year profit increases in first four months, NBS data shows, recovering from slowing economic activity induced by COVID-19 during the same period last year.

Profits jumped 484% between January and April in the non-ferrous smelting and pressing industry. Synthetic fiber manufacturing posted a 650.2% increase in profits.

The rapid growth in profits for metal processing was boosted by rising metal prices, said Iris Pang, chief economist for Greater China at ING.

“But this good time might not last as the government clamps down on high commodity prices,” she said.

Chinese government watchdogs have warned metal industry companies to maintain “normal market order” when negotiating significant metal price gains this year, China’s chief economic planner said on Monday.

Weak earnings from apparel and textiles manufacturing reflect a still gradual global economic recovery amid uncertainties over COVID-19 cases in Asia, Pang said.

China’s economy saw record growth in the first quarter as it emerged from the pandemic, although analysts expect the strong expansion to slow down later this year.

Officials warn that the foundations for economic recovery are not yet solid amid emerging issues, including pressures on businesses from rising raw material costs as international commodity prices rise.

From the start of the year to mid-May, the prices of steel rebar, hot-rolled steel coil and copper in China – vital for the construction of machinery, buildings, appliances and vehicles – jumped more than 30%.

Exports picked up in April as a strong recovery in the United States and the lockdown of industrial production in countries affected by the virus, including India, boosted China’s overseas orders.

However, factory activity and output growth slowed in April, as companies faced challenges such as chip and container shortages, international logistics issues and rising freight rates.

Commitments from industrial companies rose 8.6% year-on-year at the end of April, compared with 9.0% growth at the end of March.

The industrial profit data covers large companies with annual revenues of more than 20 million yuan from their main operations.

($ 1 = 6.3936 yuan Chinese renminbi)

Reporting by Gabriel Crossley; Additional writing by Roxanne Liu; Editing by Sam Holmes and Richard Pullin

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