Chinese steel companies forecast great drop in 2008 net profits

Tuesday, 03 February 2009 12:04:16 (GMT+3)   |  
       

SteelOrbis Shanghai

Among China's 32 listed steel companies, 20 have forecasted a huge drop in 2008 profit by February 1, 2009, with profit decrease announced by 19 of them, only 1 company predicting increase. The 2008 net profits of 19 steel companies such as Angang and Taigang Stainless Steel fell down by more than 50 percent, of which 5 companies like Panzhihua Steel and Shaoguan Steel even registered their first full-year losses in the history. Meanwhile, due to the structural adjustment of product varieties, Fushun Special Steel is the only company that forecasted a rise in profit.

Panzhihua Steel estimated that its loss is around RMB 430 million ($63 million) for year 2008, compared to the 2007 net profit of RMB 950 million ($139 million). It explained that seriously affected by the snow disaster, the May 12 earthquake, and the global financial crisis, this company's 2008 profit has plunged by a big margin.

As one of Panzhihua Steel's production bases, Changcheng Special Steel has also suffered the same plight, with the forecasted loss of RMB 350 million ($51 million) for 2008, down 1279.83 percent year on year.

In addition, due to the steel price slump and some other factors, Xining Special Steel forecasted a loss for year 2008, while in 2007 this company achieved a net profit of RMB 300 million ($44 million). Shaoguan Steel disclosed its first full-year loss of RMB 1.35 billion ($198 million), down 263 percent year on year. Guangzhou Steel is also expected to suffer loss in 2008, compared to its net profit of RMB 37.7529 million ($5.53 million) in 2007.

Although not in the red, 14 steel companies including Angang and Taigang registered a sharp drop in net profits.

Angang has announced that its 2008 net profit totaled around RMB 3.42 billion ($500 million), down 55 percent or so year on year. For the respective quarters, the company's net profit came to RMB 2.44 billion ($357 million), RMB 3.54 billion ($518 million), RMB 2.27 billion ($332 million), and a loss of RMB 4.83 billion ($707 million) in the fourth quarter.

Taigang Stainless Steel is expected to achieve a net profit of about RMB 1.2 billion ($176 million) in year 2008, down 72 percent compared with the net profit of RMB 4.248 billion ($622 million) registered in the previous year.

Liuzhou Steel predicted a 98-percent plunge in its 2008 net profit; while the drops in the net profit of Fujian Sanming Steel were around 70-100 percent. Net profits of Jiangxi Changli and Jiuquan Steel are expected to slump by more than 90 percent, and the decreases in the net profits of Linyuan Steel, Anyang Steel, Chengde Steel, Laiwu Steel, Nanjing Steel, and Bayi Steel were all above 50 percent for the year 2008.

Among so many announcements, the forecast of Fushun Special Steel is particularly noticeable. The company said that as a result of the structural adjustment of product varieties, its 2008 net profit rose by 50 percent year on year.

There are four major reasons contributing to the great losses observed in Chinese steel companies: 1. Steel price slump; 2. High cost raw materials and depreciation of assets; 3. Downstream demand shrinkage; 4. Snow disaster and earthquake.


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