Wuhan Iron and Steel (Group) Co WISCO, China's third-biggest steelmaker, plans to cut costs by 2.8 billion yuan ($347 million) this year as it and other Chinese steel companies struggle against falling sales prices. WISCO posted record sales and profit in 2005, but it faces challenges this year to maintain momentum amid a market surplus and dropping prices.

Wisco's sales reached 53.3 billion yuan last year, 20% higher than earlier projections. Profit was flat at 7.1 billion yuan, the firm said.

Rising raw material prices translated into a cost increase of 4 billion yuan for the company last year. Steelmakers are unable to pass on escalating raw material costs due to dropping street prices for their products. Steel prices began to fall last April, and analysts don't foresee much, if any, improvement this year.

WISCO plans to become one of Fortune Magazine's top 500 companies in five years, with a production capacity of 40 million tons of steel. Baosteel is now the only Chinese steelmaker in the ranking, listed in 309th place.