China Eastern Airlines

Snowstorms taking toll on mainland profits

PUBLISHED : Saturday, 02 February, 2008, 12:00am
UPDATED : Saturday, 02 February, 2008, 12:00am

The fierce storms battering the mainland are also slowing operations and cutting into the profitability of key industries such as airlines and the steel sector, according to reports by analysts and individual companies.

According to the China Insurance Regulatory Commission, mainland insurers had received 130,000 claims by the end of last month.

PICC Property and Casualty, one of the largest insurance firms, said yesterday the company had paid more than 100 million yuan to settle claims from its customers.

'It's difficult to make a general conclusion about the impact of the snowstorms on mainland companies,' said Wong Chi-man, an analyst at Piper Jaffray Asia. 'They involve various industries and geographical locations.'

Three state-owned airlines yesterday also claimed they would suffer from the disastrous weather due to cancelled flights.

China Southern Airlines, the nation's largest carrier, based in Guangzhou, said the country's worst snowstorms would cost it at least 100 million yuan.

It had cancelled more than 1,300 flights as of yesterday, the company said.

Beijing-based Air China said it would suffer losses of about 50 million yuan from the snowstorms.

A spokesman said the company was not as affected as its rivals because it mainly served the northern region, which has not been hit hard by the storms.

Shanghai-based China Eastern Airlines declined to comment on the extent of the losses it incurred. But market watchers believe it would suffer the most since bad weather in Shanghai last month led to the cancellation of flights.

Steelmakers in the affected areas are under pressure as the snowstorms led to power shortages and traffic congestion that affected the supply of raw materials, such as coal and coke, and the shipment of finished products.

Speciality steelmaker Hunan Valin Steel Tube & Wire, a partner of industry leader ArcelorMittal, said yesterday that it had suspended some production because of the power shortage.

UBS said in a research report that the steelmakers' geographical location played an important role in their access to raw materials, shipments to customers and power rationing.

'Although it is difficult to quantify the output reduction following the weather crisis, we estimate steel output and exports fell 5 per cent to 10 per cent in January over the previous month,' UBS said.

With additional reporting by Charlotte So, Bloomberg, Reuters

Suffering losses

China Southern Airlines says the bad weather will cost it at least, in yuan 100m