Mainland steelmakers should not be too optimistic about demand this year because the industry was suffering from overcapacity, a senior official at the China Steel and Iron Association said.
Wu Xichun, an adviser to the association, said steel production capacity was likely to outstrip output this year, the China Securities Journal reported.
The mainland's steel production capacity reached 660 million tonnes last year, but the industry's output was only about 500 million tonnes.
'It is not easy for the industry to maintain 500 million tonnes of output this year,' Mr Wu said.
The Shanghai Securities News yesterday cited a Baosteel Group executive as saying the top steelmaker reported a 32 per cent plunge in earnings last year to 23 billion yuan (HK$26.08 billion).
Baosteel cut production by 30 per cent in the final quarter last year amid rapidly shrinking demand from industries such as shipbuilding, it said.
Other key steel groups also recorded a decline in demand and prices that quarter, the paper said.
Wuhan Iron and Steel Group's gross profit for last year fell 18 per cent from 2007 to 7.6 billion yuan, while Shandong Iron and Steel Group's profit fell more than 50 per cent to about 3.5 billion yuan.
Helen Wang, a metals analyst at DBS Vickers, said industry earnings would be weak in the first half.