Bloomberg reported that Maanshan Iron & Steel Co's first quarter profit fell by 80% because of higher fuel and raw material costs.

Net income for the quarter ended March 31st 2011 fell to CNY 106.1 million from CNY 520.6 million, a year ago. Operating revenue climbed 43% to CNY 20.5 billion on rising steel product prices.

Competition and high raw material costs depressed profit margins for China's key steelmakers to only 3% in the first quarter. Spot prices for 62% iron ore arriving in Tianjin gained 5.2% in 2011 to USD 178.9 as of April 26th 2011. Operating costs for the company rose more than 50% in the first three months of the year versus 2010.

It said in the statement that "At present, prices of raw materials and fuels still remained at high levels, resulting in a continuous rise in production costs for iron and steel enterprises."

According to Beijing Antaike Information Development Co, the average price of steel reinforcing bars in China gained 22% to CNY 4,746 a tonne in the first quarter from a year ago. Prices of cold rolled sheets, used in cars and appliances, dropped 2.3% in the same period.

Mr Xu Lejiang chairman of Baosteel Group Corporation said that Vehicle sales in China may grow 10% in 2011 after rising 32% in 2010, stoking concern that demand for automotive steel sheets may slow.

Steel bars and wire accounted for 32% of Maanshan's sales in 2010, while sheets and plates accounted for 50%.

(Sourced from www.bloomberg.net)