Baosteel profit dips, China slowdown hits steel prices
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Baoshan Iron & Steel Co Ltd, China's biggest listed steelmaker, said on Monday third-quarter profit fell 4.9 p e rcent on a rapid decline in steel prices and weakening demand.
The Shanghai-based company, known as Baosteel, saw its third-quarter net profit fall to 1.18 billion yuan ($188.9 million), exceeding an average forecast of 876 million by four analysts polled by Reuters.
Baosteel also said in a filing to the Shanghai stock exchange that it expects China's steel prices to stabilise in the fourth quarter, but a rebound in raw materials prices and oversupply in the sector will curb steel mills' margins.
Along with measures from the government to boost economic growth, steel prices are expected to stabilise in the fourth quarter, but the situation of oversupply will hardly improve, the company said.
An economic slowdown in China, the world's top steel producer, has hit demand for steel, sending prices tumbling 26 percent to three-year lows in early September from the 2012 high in mid-April. Iron ore prices slid 40 percent in the same period.
But there have been brighter signs. Rebar prices on the Shanghai Futures Exchange have since bounced more than 10 percent on a seasonal pick-up in demand, partly supported by government measures to boost infrastructure investment, and analysts expect improved profitability in the current quarter.
Worried by the slide in steel demand, S&P has cut its long-term corporate credit ratings on Baosteel as well as rival South Korean competitor POSCO. POSCO posted a 25 percent drop in third-quarter profit.
Shares of Baosteel have fallen over 5 percent so far this year, in line with the similar fall in the broader CSI300 index of top Chinese companies.
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