(Yicai Global) April 27 -- Steel prices have tumbled this month to hit a yearly low, hurting the bottom line of Chinese steel companies which are already under pressure from lack of demand and weak expectations.

The most actively traded steel rebar contracts on the Shanghai Futures Exchange slumped below the threshold of CNY3,700 (USD534) a ton to CNY3,690 on April 24, the lowest so far this year. And the price of steel rebars has sunk 10 percent this month.

And as a result, steel mills are feeling the pinch. Profit at key steel producers plunged 71.4 percent in the first quarter from a year earlier, according to data released by the China Iron and Steel Association yesterday.

And eight out of the 17 steel companies to have released their first-quarter reports so far have reported a decline in net profit, according to incomplete statistics. Xinxing Ductile Iron Pipes logged a 40 percent dive to CNY341 million (USD49.2 million) while Jiangsu Shagang posted a 73.8 percent drop to CNY51.5 million.

China’s steel market is being affected by the sluggish real estate market, sliding profitability in the manufacturing industry, stalled investment growth, weak consumption demand and a drop in exports, industry insiders said.

But steel prices will likely recover in the second half, Wu Wenzhang, chair of steel information provider platform Steelhome, said recently. Consumption in China's crude steel market this year is basically the same or slightly lower than last year, and steel prices will probably fluctuate in the second quarter and pick up in the second half.

How much the price rebounds mainly depends on China’s economic recovery and efforts to track down and penalize illegal production, he added.

The stocks of steel mills were lackluster today. Xinxing Ductile [SHE:000778] closed down 1.1 percent at CNY4.47 (USD0.65) apiece today, Shagang [SHE:002075] dipped 0.78 percent to finish the day at CNY3.84 and Ansteel [SHE:000898] closed flat at CNY2.93.

Editor: Kim Taylor