China Special Steel Holdings, which makes bearings and springs used in cars and machinery, will shift its focus to production of high-value-added stainless steel base materials after reporting a 26 per cent slump in last year's profit. Profit for the Henan-based steelmaker fell to 90.3 million yuan from 122 million yuan a year earlier as tax and administrative expenses increased. Turnover increased 5 per cent to 879.8 million yuan. Dong Shutong, the Hong Kong-listed firm's controlling shareholder and chairman, said this year the firm aimed to produce 250,000 tonnes of stainless steel base materials, also known as purified nickel pig iron. 'Stainless steel base materials have a gross profit margin of nearly 50 per cent, much higher than bearings and springs' 21 per cent, which could enhance the company's overall profitability,' Mr Dong said yesterday at a media briefing. Special Steel started to produce stainless steel base materials in January and sold to major manufacturers, including Taiyuan Iron & Steel (Group), Baoshan Iron & Steel and Korea's Posco. The average selling price of base materials, excluding value-added tax, was 8,300 yuan per tonne in the first quarter, compared with 3,200 yuan per tonne for bearings and springs. As production of stainless steel base materials would occupy existing manufacturing facilities, Mr Dong said Special Steel's output of bearings and springs would fall to about 50,000 tonnes this year from 268,835 tonnes last year. Iron and nickel ore needed for producing stainless steel base materials would come from firm's planned ore mine acquisition. The HK$2.73 billion deal would give Special Steel the exclusive right to buy a minimum of three million tonnes of ore at a fixed price of US$16 per dry tonne from an Indonesian mine, which has 150 million tonnes of ore, including 45 per cent grade iron ore and 0.7 per cent grade nickel ore. The acquisition is still awaiting approval from independent shareholders. Mr Dong said the firm was aiming to boost its annual production capacity for stainless steel base materials to one million tonnes over the next few years from 300,000 tonnes. The company was considering inviting its customers to take part in the expansion project. Shares of Special Steel fell 1.3 per cent to close at HK$2.27 yesterday after it announced its results.