China's biggest steel-maker will also buy assets to raise production capacity to serve the world's biggest market Baoshan Iron & Steel (Baosteel) has raised its sales forecast for the year and plans to boost production capacity for cold-rolled steel and steel pipes by purchasing assets from its parent and other parties. In a circular to shareholders, the mainland's largest steel-maker said it had raised its full-year sales forecast to 42.4 billion yuan (HK$39.74 billion), up from a 39.36 billion yuan goal set in late April and a 32.76 billion target set at the start of the year. It also plans to buy assets to raise its capacity to produce cold-rolled steel by 14.58 per cent and steel pipes by about one third. The move is a sign of buoyant conditions in the mainland steel market. Product prices have climbed sharply since the middle of last year, driven by high growth in the car manufacturing, ship-building, oil and gas pipeline construction, infrastructure, power-generation equipment and real estate sectors. An official at Baoshan's public relations office said the revenue revision was due to better than expected steel prices and general market conditions. The company also revised its budgeted operating expenses to 29.3 billion yuan, up from 29.08 billion yuan indicated in late April and 24.43 billion yuan budgeted at the beginning of the year. The rise in forecast sales - coupled with a marginal increase in expenses - implies operating profit margin should expand. In the circular, Baoshan announced a proposal to buy from parent Shanghai Baosteel Group a technology centre, several plots of land and related buildings for 452.19 million yuan. It also proposed buying 79.82 per cent of Lubao Steel Pipe from its parent for 221.41 million yuan, or 4.71 times the company's earnings last year. Lubao posted an audited first-half net profit of 20.5 million yuan. Last year's profit was 58.86 million yuan, up from 41.78 million yuan in 2001. The Baoshan official said Lubao had more than 200,000 tonnes of annual production capacity, which would add about a third to Baoshan's existing steel pipe capacity of 700,000 to 800,000 tonnes. Separately, Baoshan has proposed buying all of Shanghai Baosteel Yichang Steel Plates (Yichang) from its parent and other companies for 1.39 billion yuan, or 11.54 times the company's earnings last year. Yichang's first-half net profit was 70.03 million yuan. Net profit jumped to 120.43 million yuan last year from 45.10 million in 2001. Yichang makes cold-rolled steel plates, used mainly in cars and home electrical appliances, as well as tin-plated steel plates. The Baoshan official said Yichang had one line with the capacity to produce 700,000 tonnes of cold-rolled steel annually, compared with Baoshan's existing capacity of 4.8 million tonnes at three lines. Late last year, Baoshan said it would build another production line with 1.7 million tonnes of capacity. The plant is scheduled to come on stream in 2005. At the time, the company said it would invest 12 billion yuan to boost capacity to produce steel products used in cars, ships and oil and gas pipelines. It forecast mainland demand for cold-rolled steel would reach 20 million tonnes by 2005, up from 17 million tonnes in 2000. Parent Shanghai Baosteel produced 20 million tonnes of steel products last year - making it the No5 producer globally - while Baoshan's output was 12 million tonnes. China is the world's largest steel producer, consumer and importer. Output surged 21 per cent in the first seven months of the year to 122 million tonnes.