Baosteel faces 'most difficult time' as output, sales and profit suffer

PUBLISHED : Saturday, 29 November, 2008, 12:00am
UPDATED : Saturday, 29 November, 2008, 12:00am

Baosteel Group Corp, the mainland's top steelmaker, said it was facing the most difficult period in the company's 30-year history as losses in the industry mount amid slumping demand and prices.

'International and domestic steel prices continue to fall, and stockpiles are increasing' amid the global financial crisis, He Wenbo, Baosteel's general manager, said in the Shanghai-based steelmaker's newsletter.

Mr He said high-priced raw material inventories were hurting the profitability of steelmakers, and the industry as a whole had already plunged into a loss.

Baosteel's output, sales and profit also suffered, and the company had entered the most difficult time since its establishment, he said.

'To cope with the crisis, we should adjust our production-sales strategy swiftly [by] increasing the sale of high-value-added products,' he said.

'We should also reduce or adjust the scale of fixed assets and long-term investment.'

Last month, the company's Shanghai-listed flagship, Baoshan Iron & Steel, said its stainless steel and carbon steel businesses might post a loss in the fourth quarter.

The mainland's steel prices have fallen 40 per cent from their peaks in June despite output reductions by steelmakers.

Baoshan Steel cut hot-rolled product prices 18 per cent on Thursday to 3,242 yuan (HK$3,680) a tonne for January delivery, following a 22 per cent cut in cold-rolled prices last week for December delivery. The unit will keep the cold-rolled prices unchanged at 3,626 yuan in January.

Analysts said the mainland's steel industry was unlikely to recover quickly despite Beijing's 4 trillion yuan economic stimulus package and recent interest rate cuts. Mainland steelmakers are likely to post losses in the fourth quarter this year and the first quarter next year.