Shougang profit increases 42pc as prices rally
First-quarter profit for Beijing Shougang, the mainland's largest producer of wire rods used in construction, rose 42 per cent, thanks to a recovery in the price of its products after the government closed inefficient mills and demand increased.
Profit for the three months to March increased to 141.3 million yuan, from 99.6 million yuan a year earlier. Turnover rose 7.2 per cent to 6.27 billion yuan.
The Shenzhen-listed steelmaker's net profit for last year slumped 38.7 per cent because of fierce competition in the sector, which pushed down the average selling prices of its major steel products by 2.5 per cent.
After producing 4.64 million tonnes of steel products last year, the listed arm of Beijing-based Shougang Group, the mainland's ninth-biggest steelmaker by 2006 production, said this year its output would probably remain a flat 4.65 million tonnes with sales revenue of 21.8 billion yuan.
Analysts expect the profit of steelmakers this year will improve on the back of higher steel prices and government measures to rein in overcapacity.
Prices for hot-rolled steel prices rebounded by about a third since the first quarter of last year and cold-rolled steel by about 20 per cent, according to a China Merchants Securities report.
Baoshan Iron & Steel, the mainland's largest steelmaker, said on Tuesday that its first-quarter net profit would jump more than 1.5 times. The Shanghai-listed steelmaker has raised its second-quarter selling prices amid strong demand from sectors such as shipbuilding, cars and construction.
However, analysts also warned that earnings for steelmakers would be negatively affected by Beijing's latest move to reduce or abolish tax rebates on exports of more than 150 steel products, effective from April 15.
Rebates on exports of high-end steel products such as stainless plate and cold-rolled steel sheet will drop from 8 per cent to 5 per cent, and those on low-end products such as hot-rolled steel sheet and section steel will be abolished. ,
Shougang exported 521,300 tonnes of steel products last year.
