Angang dismisses concerns over costs

PUBLISHED : Thursday, 21 August, 2003, 12:00am
UPDATED : Thursday, 21 August, 2003, 12:00am

Steelmaker says it is aided by in-house supply of materials

Angang New Steel - the listed flagship of the mainland's second-largest steelmaker, Anshan Iron and Steel Group - says it is not worried fast-growing industry capacity will lead to sharp rises in materials costs.

Although Angang faced rising raw materials costs like its competitors, a high reliance on in-house raw materials production meant the company was better positioned to withstand the pressure, general manager Yao Lin said

'Some 85 per cent of our raw materials are sourced from our parent, so overall we should do better than others,' he said.

Angang buys from its parent hot-rolled steel sheets, which a Core Pacific-Yamaichi research report said had risen 31 per cent in price in the first half. But a rise of more than 50 per cent in prices for cold-rolled sheets, which the company makes, meant higher profit margins.

Mr Yao also rejected concerns that aggressive investment in the industry would lead to oversupply. 'We are optimistic on the industry's outlook,' he said.

'Generally, it takes two to three years for new capacity to come to the market.'

The State Development and Reform Commission recently warned the industry faced increased risks of overcapacity and could pay a 'hefty price' should investment in the economy slow down.

On Monday, Angang reported first-half profit rose 218.73 per cent year on year to 620.35 million yuan (HK$584.79 million), higher than expected.

Company secretary Fu Jihui said yesterday second-half profit growth would likely be slower compared with the first half. Second-half output for its four core product categories was forecast at 1,950 tonnes, flat from 1,943 tonnes in the first half.

He said the company's average selling price for cold-rolled steel - used in car manufacturing - had fallen to 3,400 yuan a tonne last month from 3,724 yuan a tonne over the first half.

Average prices for thick plates - another infrastructure-related product - rose to 3,500 yuan from 3,063 yuan. Wire rods climbed to 2,300 yuan from 2,165 yuan, while large sections and beams rose to 2,950 yuan from 2,615 yuan.

Mr Fu expects prices to remain stable for the rest of the year.

A joint-venture with Thyssen-Krupp of Germany to make galvanised-steel will begin operation in late September, with capacity rising from 40,000 to 50,000 tonnes this year to 500,000 to 600,000 tonnes next year. Galvanised steel is made from cold-rolled steel - a high-end product which China must still import,

Mr Yao expects cold-rolled steel to account for more than 50 per cent of turnover in the second half, up from 44 per cent in the first half.