Car shipments to help fuel steel demand

By Helen Yuan (China Daily)
Updated: 2010-11-02 15:13
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SHANGHAI - Baoshan Iron & Steel Co, China's largest publicly traded steelmaker, said domestic steel demand will be maintained in 2011 as economic growth spurs shipments to automobile companies.

"Steel demand will keep steady next year based on our view of the macro economy and the industry," General Manager Ma Guoqiang said on Monday in an online meeting with investors. "We won't see a big increase, yet we are unlikely to see conditions worsen."

Baoshan Steel, which controls half the local market for automotive steel, on Friday forecast the highest profit in at least three years on reviving demand. China's economy may grow 9.5 percent next year, the China Securities Journal reported on Monday, citing Fan Jianping, chief economist at the State Information Center.

"China's auto consumption will grow steadily over a long period," Ma said on Monday. "Automotive steel has been one of the most profitable products."

Baoshan Steel said on Friday third-quarter profit fell 16 percent to 2.55 billion yuan ($382 million), the smallest this year, as a government crackdown on real-estate speculations curbed demand and high prices of raw materials eroded margins.

Car shipments to help fuel steel demandManufacturing continues to expand
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"Baosteel delivered a strong profit while its peers Angang and Maanshan Steel recorded losses," Citigroup Inc analyst Scarlett Chen said in a Friday note. Prices of cold-rolled coil, used in automobiles and appliances, "could pick up soon if auto sales continue growing and inventory at traders starts falling", she said. Citigroup raised its forecast by 58 percent for Baoshan profit in 2011.

China's apparent crude steel consumption fell 4.8 percent to 194.6 million tons in the July to September period from a year earlier, according to the China Iron and Steel Association. Demand rose 18 percent in the first five months of 2010 from a year earlier, it said.

The nation's steel output dropped to 47.95 million tons in September, the lowest level this year, after the government stepped up measures to rein in property speculation and limited power supplies to mills. The power cuts may trim steel supply by 9.6 percent through the rest of this year, research site said on Sept 9.

While the power cuts will not affect production at Baoshan Steel, the company may carry out annual plant maintenance in the fourth quarter, Ma said.

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