Bloomberg News

Angang Gains in Hong Kong on Expectation of Lower Iron Ore Costs

April 16, 2012

Angang Steel Co. (347), the biggest Hong Kong-traded steelmaker, gained after saying it will buy iron ore from its parent at rates closer to spot market prices amid expectations that raw material costs may fall.

Angang climbed as much as 2.1 percent to HK$5.42 in Hong Kong and traded at HK$5.40 at 11:29 a.m. local time. The benchmark Hang Seng (2828) Index fell 0.7 percent.

The steelmaker, based in Anshan in Liaoning province, will buy ore from parent Anshan Iron & Steel Group in 2012 and 2013 at a 5 percent discount to the average spot price two months earlier, the company said in a statement to the Shenzhen stock exchange today. The previous rate was based on average prices of the prior six months.

“Under the new agreement, Angang’s earnings should at least turn around in the first quarter,” Helen Lau, a Hong Kong-based analyst with UOB-Kay Hian Ltd., said in an e-mailed note today. Angang will adjust its first-quarter results once shareholders approve the agreement at a meeting scheduled on June 28, she said.

Iron ore prices remain “distorted” and have room to fall 10 percent to 20 percent, Chen Ming, Angang Steel’s vice chairman, said in Hong Kong March 29.

Spot prices of 62 percent-iron ore arriving at China’s Tianjin port gained 8 percent this year, according to the Steel Index. It fell 0.1 percent yesterday to $149.30 a metric ton.

Angang expects a first-quarter loss of about 1.89 billion yuan ($299 million), compared with a profit of 71 million yuan a year earlier due to a steep decline in steel prices, the company said in an April 13 Hong Kong stock exchange statement, citing unaudited figures under Chinese accounting standards.

To contact Bloomberg News staff for this story: Helen Yuan in Shanghai at hyuan@bloomberg.net

To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net


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