Bloomberg News

Chinese Steelmakers Profit Tumbles 96% on Lower Demand, Prices

July 31, 2012

Chinese steelmakers, including Baoshan Iron & Steel Co. and Angang Steel Co., posted a 96 percent drop in first-half profit as a slowing economy curbed demand and prices were cut, an industry official said.

Aggregate profit of the nation’s steelmakers was 2.39 billion yuan ($375 million) in the period, Zhang Changfu, general secretary of the producer-funded China Iron and Steel Association, told reporters today in Beijing, without providing an aggregate year-ago figure. Profit margins shrank to 0.13 percent from 3.06 percent a year ago, he said at the association’s quarterly press conference.

China’s economy expanded 7.6 percent in the second quarter, the slowest pace in three years, as Europe’s debt crisis sapped exports and a crackdown on property speculation curbed domestic steel demand. Some producers, including Maanshan Iron & Steel (323) Co., the nation’s second-biggest, are halting plants for maintenance to cope with the price plunge.

“The first half saw a big drop in investments for property and also in railways, cars and ships, so demand for steel has weakened,” Zhang said, “Difficulties in steel exports to the EU may worsen in the second half due to the debt crisis.”

The association has asked the government to cut export taxes on some high-grade products, Qu Xiuli, who oversees finance issues for the grouping, said at the conference.

The Ministry of Industry and Information Technology is considering giving a 17 percent value-added tax rebate to domestic mills that supply steel for exported products, Shanghai Securities News reported today, citing an unidentified person close to the ministry. Suppliers of silicon steel, used in power transformers, and ship plates may be the first to benefit, according to the report.

Chinese mills are exporting steel at the highest level in two years, exacerbating a global glut that may hurt competitors from ArcelorMittal (MT) to U.S. Steel Corp. (X:US) Monthly overseas steel shipments rose to 8.7 percent of domestic output last month, the highest proportion since July 2010.

To contact Bloomberg News staff for this story: Daryl Loo in Beijing at dloo7@bloomberg.net; 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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