Shanghai Steel Tube banks on increased output for more profit

NEWLY listed Shanghai Steel Tube is hoping its production expansion plan - which will be completed over the next two years - will enable the firm to achieve an extra earnings bonanza.

Chairman Gong Hongling expected the company's profit would increase by 40 per cent when its manufacturing facilities for pressure boiler steel tube and seamless steel tube for the chassis of Volkswagen Santana saloons began operation in 1995 and 1996, respectively.

Shanghai Steel will provide Shanghai Volkswagen Automotive with precision steel tubing for the Santana saloon in line with the drive by Beijing to encourage the use of mainland-made components.

Ms Gong estimated that the company's profit would grow by more than 10 per cent this year, despite the relative stable price for steel products in the first six months.

She said prices of steel products had been steady since the middle of last year, following Beijing's announcement of an austerity programme to curb the spiralling property market and control runaway inflation.

Shanghai Steel Tube had already secured orders for 40,000 tonnes of seamless steel tubing until August this year, 10,000 tonnes more than the company's half-year production capacity, indicating that market demand remained strong, said Ms Gong.