September 08, 2008

Baosteel Q3 net to fall on weak SS market conditions

It is reported that Baoshan Iron and Steel Corp is set to report a drop in third quarter earnings as stainless steel prices weakened and the outlook for the fourth quarter is clouded by oversupply. While the global steel market is showing signs of recovery after a bout of weakness earlier this year, Chinese steelmakers' earnings are seen under pressure until next year as they struggle to digest overcapacity.

Mr Luo Wei analyst at China International Capital Corp cut his full year earnings forecast for Baosteel to CNY 0.90 per share from the CNY 1.00 which many analysts forecast.

According to the average forecast of seven analysts Baosteel is expected to post a 7%YoY fall in its third quarter net profit to CNY 4.38 billion when it reports results on October 30th. Baosteel earned CNY 4.48 billion for the April to June period.

In August, Baosteel cut prices of its major products for the fourth quarter, partly due to economic uncertainty caused by the global credit squeeze. Baosteel has said its stainless steel operation will face a big challenge in the second half.

Ms Helen Lau Shanghai based analyst at Daiwa Securities said that they lost money from hot rolled stainless steel, although its cold rolled stainless steel business remained profitable."

This summer Baosteel cut the output of its stainless steel products by 20% to 30% in what industry sources said was an effort to prevent domestic prices from weakening further.