Largest smelter sees big profits

A worker checks the quality of stainless steel wire at a steel company in Dalian, Liaoning province. [Photo by Liu Debin/For China Daily]

Baosteel Group, the largest steel smelter in China by output, has predicted yearly profit growth of six to eight fold this year.

The company registered 8.1 billion yuan ($1.2 billion) of profits in the first three quarters, up 174.6 percent from the same period last year, according to its profit statement released on Monday.

It attributed the huge growth to its strong efforts in cost reduction, market expansion and portfolio optimization.

Yet, it also warned that capacity reduction still had a long way to go for the whole industry.

In the first eight months, China's steel industry achieved 21.5 billion yuan in net profit, up 39.4 billion yuan from net losses last year, during the same period.

The average price of the four major iron and steel products (wire, deformed steel bars, medium plates and cold-rolled sheets) was 2,931 yuan per ton, up 685 yuan, or 30.5 percent, from the beginning of this year.

The booming real estate business and rising fuel costs were the main reasons for the steel price increase, said Liu Xinwei, steel analyst with Shandong-based bulk commodity information company Sublime China Information Group Co Ltd.

"Steel prices are mainly affected by costs. The coke prices have been rising, driving up the steel prices. Moreover, the fast developing real estate and a shortage of steel stocks have further driven up the prices," said Liu.

The profit outlook of Ansteel Group Corp, based in Liaoning province, shows that the company is expected to achieve earnings of 977 million yuan, turning around from total losses of 888 million yuan in the same period last year.

The publicity office of Ansteel said that the company has not been assigned any goals of capacity reduction because its productivity has been very good.

Baosteel saw its stock price at Shanghai Stock Exchange up 0.12 percent to 5.69 yuan per share on Tuesday.

Ansteel's shares rose to 4.63 yuan per share, up 0.07 percent, on Tuesday.

Liu said that there won't be a significant increase in steel prices for the rest of the year.

Contact the writers through yangziman@chinadaily.com.cn