China steelmakers' profits slump on rising iron ore prices
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Xinhua, August 30, 2011
China's steelmakers saw their profits dented by surging iron ore prices in the first half of the year, according to preliminary statistics.
Twenty-seven listed Chinese steel producers released their H1 results as of Monday night. Their combined net profits slumped 15.7 percent year-on-year to 9.98 billion yuan (1.56 billion U.S. dollars), according to Wind Information, a Shanghai-based financial data provider.
Of the 27 listed steel companies, 16 reported lower profit margins, accounting for 59.3 percent of the total, the Economic Information Daily quoted an unnamed steel analyst from CITIC Securities as saying on Tuesday.
The shrinking profits contrasted with the more-than-85- percent annual profit growth posted by global mining company BHP Billiton for the year ending on June 30.
In the first half of 2011, China imported 334 million metric tons of iron ore, 8.1 percent more than the amount imported during the same period last year, according to official data. The average price for iron ore increased by 42.4 percent year-on-year to 161 U.S. dollars per metric ton, according to the data.
China's steel output grew by 9.6 percent year-on-year in the first half to 350 million metric tons, but the industry's profit margins dropped to 2.42 percent in the first five months, the lowest in years, the Ministry of Industry and Information Technology (MIIT) said earlier this month.
The ministry attributed the weaker profitability to rising iron ore prices.
"The steel industry will continue to suffer great pressure during the second half of this year," said Xu Xiangchun, chief analyst for mysteel.com, a Chinese Internet portal dedicated to iron and steel trade.
Demand for steel products will slip further in the second half because of an expected slowdown in China's economy, while steelmakers will find it hard to raise funds due to government tightening measures aimed at curbing inflation, said Xu.
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