Bloomberg reported that the company also known as Baosteel earned profits of CNY 2.38 billion in the first half of the year down by 53%YoY, its performance hit by sluggish demand and persistent overproduction in the Chinese steel sector, the world biggest.

Mr Ma Guoqiang general manager said during an online shareholder briefing that "We won't face losses, (but) according to current forecasts, the third quarter will be the most difficult period of the year."

Mr Ma said the company expected iron ore prices to fall further during the rest of the year, with steel demand still weak and domestic mills likely to schedule most of their overhauls. But he added that Baosteel complete dependence on overseas iron ore supplies gave it an advantage compared with those rivals that sourced ore from more expensive domestic mines.

He added that "Compared to other domestic mills our cost advantages are even better, firstly because of our geographical advantages, and secondly because of our grasp of the iron ore market and our strengthened inventory management."

Mr He Wenbo chairman of Baosteel board of directors said at the same online briefing that steel prices were unlikely to recover in the second half of 2012, adding that despite the rapid fall in iron ore prices, domestic steel firms were still facing huge cost pressures with steel prices having fallen even more.

Baosteel chairman said these were difficult times for the Chinese steel industry as a whole with demand growth at its lowest point in a decade. He said that weak growth has eroded demand from key downstream sectors like real estate and automobiles, but the Chinese steel sector is also struggling with long term structural issues including chronic overcapacity, which it needed to solve quickly.

He said that "I believe that the next 10 years will be a golden age for the restructuring of the Chinese steel sector."

Source - Bloomberg

(www.steelguru.com)