News digest

Oil output slashed

Top Asian oil and gas producer PetroChina has slashed crude output and refinery throughput in the first quarter to drain heavy inventories the company said last week, setting the stage for a possible production recovery.

PetroChina reported a 5.7 percent cut in first-quarter crude output from a year earlier, a 14.6 percent drop in refinery production and a 2.8 percent cut in fuel sales, fresh evidence that the second largest Chinese refiner is drawing down stocks by cutting production faster.

The fall in crude output is deeper than the company's forecast last month of a 4.4 percent cut for the whole of 2009.

Iron ore prices cut

China's steelmakers and global mining companies have agreed to cut term iron ore prices sharply but are still locked in talks on the scope of the price cuts, an industry body said. Luo Bingsheng, deputy head of the China Iron and Steel Association, told reporters that parties had agreed to cut iron prices for supplies under the new annual deal.

"The two parties have agreed that (iron ore) prices should fall sharply. The focus now is the size of the price cut and that should be further discussed," said Luo.

He added that Chinese ports had 70 million tons of imported iron ore currently in stock, compared with normal warehouse inventories of 30 million tons.

Spin-off listing

China's COSCO Group, the world's largest dry bulk ship operator, aims to list its tanker shipping operations separately although it has no timetable for a spin-off, a top executive of the tanker unit said.

"The group has always been considering taking us out and listing us independently," said Dalian Ocean Shipping Co Managing Director Meng Qinglin.

Dalian Ocean Shipping has more than 40 oil, LNG and chemical tankers. It also owns eight very large crude carriers and rents an additional five.

COSCO Group's subsidiaries include China COSCO, a leading container shipping company, and COSCO Pacific, a container leasing firm and the world's fifth largest port operator.

LG for 3G

LG Electronics Inc, the world's third biggest mobile phone handset maker, said it had been picked to supply third-generation (3G) mobile handsets to all three carriers in China.

Chinese operators roll out long-waited advanced mobile services this year and the market for 3G handsets in China is estimated to more than double to 30 million units in 2010 from 14 million this year, LG said in a statement.

Analysts said South Korean mobile phone makers Samsung Electronics Co Ltd and LG could benefit from China's 3G service launch, as they have technological leads over Chinese companies in making phones with sophisticated 3G features.

The world's top handset maker Nokia is likely focusing on the WCDMA network in China.

CIMC profits up

China International Marine Containers Group Co (CIMC), the world's largest shipping container maker, said its first-quarter net profit was up 3.24 percent from a year earlier thanks to a jump in investment income from share sales.

CIMC, which announced a fourth-quarter loss of 295 million yuan ($43 million) in March, said its core business of dry-cargo container manufacturing remained weak in the first quarter.

SAIC profit growth slows

SAIC Motor Corp, China's biggest automaker, posted a year-on-year fall of nearly 50 percent in first-quarter earnings, as a slowing economy continued to weigh on the automobile industry.

SAIC, which runs car-manufacturing ventures with General Motors and Volkswagen, said it had 626.9 million yuan ($91.8 million) in net profit from January to March. The company posted 1.24 billion yuan in net profit for the first quarter of 2008.

For the full year of 2008, net profit dropped 85.8 percent to 656.2 million yuan.

"The weak results for 2008 are no surprise at all due to the unexpected downturn of the car market in the second half. But the market has warmed up since February and SAIC is already showing improvement in Q1 compared with Q4 of 2008," said Chen Qiaoning, an analyst with ABN AMRO TEDA Fund Management.

Changhong profit dips

China's Sichuan Changhong Electric Co's first-quarter net profit plunged 97 percent from a year earlier due to falling profit margins and investment losses, it said.

Changhong, one of China's top TV and electrical appliances makers, posted a net profit of only 2.7 million yuan ($395,000) in the first quarter, down from 95.3 million yuan a year earlier, it said in its quarterly earnings report.

Changhong, which is a major exporter to the US and Europe, did not give explanations for the drop.

But its report showed its returns on assets dropped 1.01 percentage point from a year ago to 0.03 percent in the first quarter, as the economic downturn dampened demand for appliances, forcing producers to sell at lower prices or even at a loss.

Cooling profits down

Qingdao Haier Co, the air- conditioner and refrigerator unit of China's biggest appliance maker, said first-quarter profit fell 40 percent after slower economic growth curbed consumer spending.

Net income fell to 104 million yuan ($15 million), or 0.08 yuan a share, from 173 million yuan, or 0.13 yuan a share, a year earlier, the Qingdao-based company said in a statement to Shanghai's stock exchange, citing Chinese accounting standards. Sales fell 17 percent to 6.8 billion yuan.

Alcatel wins orders

Alcatel-Lucent SA, the world's largest maker of fixed-line phone equipment, won $1.7 billion in orders to provide network upgrades and maintenance services to China's two biggest phone companies.

Alcatel received about $1 billion in orders from China Mobile Communications Group Corp and about $700 million from China Telecommunications Corp, Paris-based Alcatel said in a statement.

Chinese mobile phone operators are poised to spend an estimated $41 billion through 2010 upgrading their networks to offer third-generation wireless services, according to government forecasts. Alcatel, which has written down about 8 billion euros ($10.4 billion) since Alcatel SA bought Lucent Technologies Inc in 2006, is looking to China to revive earnings growth.

Service expansion

Bank of Communications (BoCom), China's fifth largest lender, said it aims to expand into insurance and securities in China as lending and profit growth slows amid a cooling economy.

BoCom, 19 percent owned by HSBC Holdings, has submitted an application to the central government to start an insurance business, Vice-President Qian Wenhui told reporters in Shanghai, declining to give details.

BoCom plans to buy a stake in Shanghai-based China Life-CMG Insurance Co, a joint venture between China Life Insurance Co Ltd and Commonwealth Bank of Australia, the China Securities Journal reported earlier.

Airline hopes for rebound

Loss-making China Eastern Airlines Corp, one of the country's top three airlines, may be back in the black this year due to a pick-up in the domestic air travel market, a senior company executive said.

After years of double-digit growth, China's airlines face strong headwinds this year as the global economic crisis weighs on air travel, pushing the industry deep into the red.

But the market may have resumed its normal growth pattern, as Beijing's aggressive stimulus package to bolster economic growth lifted consumer confidence and boosted air travel. "We have a chance to significantly cut our losses this year. We may even strive for profitability," said Luo Zhuping, China Eastern's board secretary.

The carrier was saddled with a 13.9 billion yuan ($2.04 billion) net loss in 2008, compared with a 603.96 million yuan net profit in 2007, according to company data.

(China Daily 05/04/2009 page9)