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Cost hikes cut into iron and steel company profits

(Xinhua)
Updated: 2008-08-02 16:53

Costs for China's large and medium-size iron and steel manufacturers rose by more than 250 billion yuan ($36.5 billion), or 57.57 percent, in the first half, according to the China Iron and Steel Association (CISA).

The cost hike was due to the soaring prices of materials and fuel, said the CISA, noting the country's iron and steel companies were facing tremendous pressure this year.

The soaring costs resulted in profit falls, with the half-year rate of return on sales for large and medium-size iron and steel suppliers at 7.61 percent, 0.95 percentage points lower than the same period last year.

The cost increase would slash profits of listed iron and steel producers, said Ma Keming, Huatai Securities analyst.

"Steel prices will stay high in the second half," said Luo Bingsheng, vice president of the CISA.

He added the growth rates of GDP, actual fixed assets investment, industrial added-value and exports would continue to decline in the second half and were expected to reduce domestic demand, so the chances were slim for new controls on steel exports.

From January to June, the raw steel output of large iron and steel companies hit 263 million tons, up 9.6 percent from the same period last year, and net steel exports stood at 19.9 million tons, 35.75 percent lower year-on-year.