Baoshan Iron and Steel (Baosteel), the mainland's largest steelmaker, warned yesterday its stainless steel and carbon steel businesses might post losses in the fourth quarter amid falling steel prices and weak demand.
The Shanghai-based steelmaker reported disappointing third-quarter earnings of 2.85 billion yuan (HK$3.23 billion), up 19.15 per cent from a year earlier but less than Morgan Stanley's estimate of 32 per cent growth. Turnover grew 12.46 per cent to 56.36 billion yuan.
For the first nine months, earnings increased 18.42 per cent to 12.49 billion yuan.
Baosteel's third-quarter earnings were substantially lower than in the two previous quarters, as its stainless steel business posted losses. It also made a 990 million yuan provision against its inventory of raw materials for stainless steel, mainly because of the fall in nickel prices.
In the first quarter, Baosteel posted a profit of 4.26 billion yuan. First-half profit was 9.65 billion yuan.
'In the face of a sharp drop in steel demand from customers, falling steel prices, a high-cost environment and pessimism about the global economy, the company will face even bigger challenges in the fourth quarter this year and first quarter next year,' Baosteel said.
As stainless steel and nickel prices continue to fall, Baosteel expects its stainless steel business to stay in the red in the fourth quarter. It expects its carbon steel business to also make a loss in the fourth quarter amid falling prices and may need to make a provision against related raw materials.