Nanjing’s Chairman Says Steel Prices Have Bottomed

By Helen Yuan and Lee Spears

Dec. 6 (Bloomberg) -- Nanjing Iron & Steel United Co., the Chinese steelmaker part-owned by billionaire Guo Guangchang, said steel prices in the world’s biggest user of the alloy have bottomed and output may recover on the state’s stimulus package.

Lower raw-material prices will allow producers to raise output, Chairman Yang Siming said today in an interview in Shanghai, where he’s attending an industry conference. “Next year, our construction-steel sales will benefit from the government’s plan to boost infrastructure investment.”

China last month announced a 4 trillion yuan ($584 billion) stimulus package to revive growth in the world’s fourth-largest economy. All Chinese steelmakers were unprofitable in October after demand from manufacturers plunged, according to the China Iron & Steel Association.

“The steel market will lead other industries in recovering under the government’s stimulus plan,” Qi Xiangdong, the association’s vice chairman, told the Shanghai conference. The industry group represents most of China’s large state-owned steel mills, including Baosteel Group Corp., the largest mill.

“Steel prices have bottomed,” Nanjing’s Yang said in the interview. The company’s production this month would recover to October’s level after four months of declines, he said, without giving figures.

Yang’s comments echo remarks yesterday from Lakshmi Mittal, chief executive officer of the world’s largest steelmaker, who said steel demand may rebound next year and the company wouldn’t deepen output cuts. ArcelorMittal has reduced output by about a third and slashed staff to cope with the global recession.

Prices Gain

Steel prices in China have risen for three straight weeks, gaining 2.4 percent this week to 3,681 yuan ($538) a ton after plunging as much as 45 percent from a June 5 record, according to data from Beijing Antaike Information Development Co.

The Nanjing, eastern China-based steelmaker had profit of 50 million yuan ($7.3 million) in October after cutting output, while the industry in China booked a collective loss, Yang said. China’s mills cut output by 10 percent in August, 30 percent in September and October, and 40 percent in November, he said.

Nanjing Steel has asked iron-ore suppliers including BHP Billiton Ltd., Rio Tinto Plc and Cia Vale do Rio Doce to slow deliveries, Chairman Yang said. About 70 percent of the ore bought by the mill is used to fill long-term contracts, he said.

China’s economy grew 9 percent in the third quarter, the slowest pace in 5 years, because of a slump in property and export demand. Government investment in the fourth quarter on railways will create demand for 1.6 million metric tons of steel and 10 million tons of cement, and provide 500,000 jobs, the National Development and Reform Commission said on Dec. 1.

China’s 71 largest steelmakers posted a combined loss of 5.8 billion yuan in October, the first time the entire industry has been money-losing, according to the China Iron & Steel Association. Baosteel Group is facing its “most difficult” period since its founding 30 years ago, General Manager He Wenbo said last month.

To contact the reporters on this story: Lee Spears in Beijing at lspears2@bloomberg.net; Helen Yuan in Shanghai at hyuan@bloomberg.net