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Baosteel to cut output in December on sagging demand

(Xinhua)
Updated: 2008-11-04 13:48

Baosteel Group, China's largest steel producer, will follow other steel giants in cutting its output in December due to sagging demand and falling steel prices, the China Securities Journal reported on Tuesday.

The newspaper quoted an unnamed industry expert as saying Baosteel would prolong the maintenance of its blast furnace in Baoshan District of Shanghai, which started in September.

The furnace has an annual production capacity of 5 million tons. The temporary shutdown would reduce the estimated production of pig iron by 1 million tons.

The expert said the steel maker would probably shut its low-emission COREX (Coal Reduction Extreme) furnace and medium and heavy plate production line in Baoshan District. The COREX furnace, built at the end of last year, produced 1.5 million tons of pig iron annually.

Chen Ying, Baosteel board secretary, said the company would fix its production in accordance with market trends and sales. Shougang Group and Wugang Group have also announced production cuts.

The company posted a third-quarter net profit of 2.85 billion yuan ($41.7 million), up 19.15 percent from the same period last year, but much lower than the 5.39 billion yuan in the second quarter and 4.26 billion yuan in the first.

Pingan Securities analyst Nie Xiuxin said steel makers worldwide were set to trim output and it would continue in 2009 if demand continued to weaken.

Slowing demand in the country's property, automobile and electrical appliance sectors pared gains for steel mills.

"Losses are certain in the steel sector in the fourth quarter," said Guoyuan Securities analyst Su Lifeng, adding that 23 large and medium-sized steel firms suffered losses in September, 32.4 percent of all steel makers.

The first nine months saw huge losses at 1.15 billion yuan, compared with about about 64 million yuan in losses for the same period last year.

Hu Hao, an analyst at Zhongyuan Securities, said the global financial turmoil would increase losses.

Baosteel president Xu Lejiang predicted China's steel output in 2008 would stand at 480 million tons, down from the 520 million tons forecast earlier this year.