BIZCHINA / News
Steel firms' profits forecast to slow down
By Gong Zhengzheng (China Daily)
Updated: 2007-06-07 09:02
Profit growth in China's steel sector, the biggest in the world, is
forecast to slow sharply this year after a blistering pace in the first
quarter.
The nation's top 99 steel companies reported a combined profit of 34.53
billion yuan in the first three months, rocketing by 282 percent from a
year earlier, according to data from China Iron and Steel Association.
Luo Bingsheng, the industry body's vice-chairman, said the profit rise
mainly resulted from a "very weak" first quarter in 2006 and could not be
maintained in the rest of the year.
"We expect full-year profits to grow at a normal and reasonable rate,"
Luo said, without providing a figure.
Echoing Luo, Sun Yong, a steel analyst from China Galaxy Securities Co
Ltd, predicted the sector's 2007 profits will climb by 30-40 percent from
last year.
Profits of more than 20 main listed steel makers in China tripled in the
first quarter from the same period last year, said Sun.
He also attributed the sensational January-March profit growth to a big
jump in steel exports and higher prices in foreign markets.
China's exports of finished steel products reached 14.1 million tons in
the period, up 125.3 percent year-on-year.
At the end of March, the international comprehensive steel price index
stood at 160.7 points, compared with 109.8 points in China.
However, he said, exports in the second half of this year will decelerate
because of the government's control measures, which are expected put a
break on profit growth.
China has just levied 5-10 percent export tariffs on 82 categories of
steel products and lifted tariffs on another 19 categories to 15 percent
from 10 percent.
This step followed a similar one in April, when the government cut export
tax rebates on 76 categories of steel products to 5 percent from 8-11
percent and completely removed tax rebates on another 83 categories.
As a result of these measures, the steel association said, steel exports
for the full year will just equal or even be lower than last year. In
2006, China exported 43 million tons of finished steel products.
Zhou Xizeng, from CITIC Securities Co Ltd, said the steel sector will
post steady profit growth this year, though not as fast as in the first
quarter, because steel prices are on the up in the domestic market.
Zhou predicted the sector's 2007 profits will climb 30 percent. "Domestic
steel prices are buttressed by strong demand from many steel-consuming
sectors, such as autos, real estate and shipbuilding."
In the first quarter of this year, crude steel demand in China climbed by
12.5 percent year-on-year to 102.6 million tons.
The government is slashing outmoded steel production capacity, which,
Zhou said, will offset the negative impact on prices from the expected
slowdown in steel exports in the second half.
According to a government plan announced earlier this year, 35 million
tons of outmoded production capacity will be removed this year to prevent
a market glut and save resources.
The total steel production capacity in China stood at almost 500 million
tons last year.
In the first three months of this year, crude steel production rose by
22.3 percent to 114.7 million tons.
The steel association predicted earlier that full-year production will
reach 462 million to 475 million tons, up from 418.8 million tons in
2006. Moreover, analysts said, rising costs will boost steel prices in
the country.
In January, China's top steel maker Baosteel, representing over 100 steel
mills in the nation, made an agreement with CVRD, BHP Billiton and Rio
Tinto - world's three largest iron ore providers - on a 9.5 percent rise
in ore prices for 2007.
China imported 100.2 million tons of ore in the first three months of
this year, up 23.1 percent year-on-year. Prices of other raw materials,
such as coal, water and power, have also been rising in China.
(For more biz stories, please visit Industry Updates)
Related Stories
� Steel prices climb 7.8% in May
===========================================================================
� Steel profits jump 3.6 times in 1st quarter
===========================================================================
� China to maintain restraints on steel exports
===========================================================================
Learn Chinese, Free Chinese Lesson
No comments:
Post a Comment