By Bloomberg News
Nov. 2 (Bloomberg) -- Baoshan Iron & Steel Co., China’s largest steelmaker, said its fourth-quarter profit will be affected by falling prices and it plans to shutter mills for annual maintenance.
Chinese steelmakers have slashed prices because of oversupply and higher inventories, Vice President Chen Ying told investors today in an online conference. The Shanghai-based mill said it may cut product sales by 200,000 metric tons in the fourth quarter from the previous three months because of maintenance plans.
“Steel prices have fallen significantly in the fourth quarter and we will arrange annual maintenance, leading to less output than the third quarter,” General Manager Ma Guoqiang said at the same conference.
Benchmark Chinese steel prices have fallen 20 percent from a 10-month high on Aug. 4 as production overwhelmed demand fueled by the nation’s 4 trillion-yuan ($586 billion) stimulus spending. Angang Steel Co., posting the best quarterly profit in a year, last month forecast that its earnings this quarter will be below the third quarter.
Baoshan Steel rose 2.3 percent to 7 yuan in Shanghai trading. The conference started after the market closed.
Baoshan Steel may post earnings per share of 0.13 yuan in the fourth quarter, according to the mean estimate of three analysts compiled by Bloomberg, down 24 percent from the 0.17 yuan for the three months ended Sept. 30. Baoshan’s third- quarter profit was its highest in five quarters.
Normal Orders
“The weakness in steel pipes and heavy plates demand, as well as the annual maintenance would affect our output and profit in the fourth quarter,” said Chen.
The mill won “normal” order levels for November, Chen said. Its stainless steel unit posted a profit in the third quarter, though earnings will be affected in the current quarter by lower prices and rising material costs, she also said.
Losses for its heavy plate and specialty steel business narrowed in the third quarter, the company said today.
Baoshan has cut monthly prices twice since September. Hebei Iron & Steel Group, China’s second-biggest mill, and Jiangsu Shagang Group Co. have also dropped prices.
Baoshan Steel will derive a higher proportion of its output from cold-rolled steel and pipes in the next two years, General Manager Ma said. Cold-rolled steel is the company’s most profitable product.
The company is targeting annual sales of 145.7 billion yuan for 2009, Ma said.
--Helen Yuan. Editors: Tan Hwee Ann, Wendy Pugh.
To contact the Bloomberg News Staff on this story: Helen Yuan in Shanghai at hyuan@bloomberg.net
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