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Baoshan Says China Steel Demand to Rebound on Policy, Liquidity

Baoshan Iron & Steel Co. (600019), China’s biggest publicly traded steelmaker, expects demand to improve in the second half as the government eases liquidity and policy restrictions, General Manager Ma Guoqiang said.

Baoshan remained profitable in the first quarter, Masaid today in a webcast conference with investors. The Shanghai-based company, which has yet to report first-quarter results, posted its lowest quarterly profit in more than two years in the last three months of 2011 because of rising prices of iron ore, a key raw material, and slowing demand from automakers.

Premier Wen Jiabao has pledged to “fine-tune” economic policies as weakening exports and a cooling housing market hamper an economy that probably grew at the slowest pace in almost three years in the first quarter. Baoshan, which supplies half of China’s automotive steel, is betting demand will rebound from last year’s slump caused by government restrictions on vehicle purchases to reduce traffic.

Growth in China’s vehicle production may accelerate to 8 percent this year, boosting steel demand, Ma said. Baosteel Group Corp. (SBSA), Baoshan’s state-owned parent, also expects government efforts to spur spending may boost China’s car sales this year, company Chairman Xu Lejiang said March 5.

The company has yet to decide on any fundraising plan for this year, he said.

High-Strength Sheets

Sale of high-strength steel sheets gained 20 percent last year, giving Baoshan 65 percent of the domestic market for the product, Ma said. The company has started to supply third- generation sheets to automakers, he said.

Parent Baosteel is awaiting regulatory approval for a 10 million-metric-ton steel project in Zhanjiang, Guangdong province, Ma said. The planned mill will help Baosteel to meet demand from the Chinese units of Japan’s Honda Motor Co., Nissan Motor Co. and Toyota Motor Corp., the steelmaker said earlier.

Baoshan will also use the proceeds from selling its unprofitable stainless and specialty steel units to lower debt, Ma said. The company will gain 9.58 billion yuan ($1.5 billion) selling the units to the parent, Baoshan said in a statement on Feb. 29.

To contact Bloomberg News staff for this story: Helen Yuan in Shanghai at hyuan@bloomberg.net

To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net

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