Baoshan Steel Sees Profit Rising This Year on Transport Demand

Baoshan Iron & Steel Co., China’s biggest publicly traded steelmaker, said its operating profit will rise this year due to strong growth in demand from automakers, railway builders and energy pipeline projects.

“We’re confident that our operating profit this year will be better than last year,” Baoshan Steel General Manager Ma Guoqiang told investors in an online meeting today.

Shanghai-based Baoshan, which supplies half of China’s automotive steel, yesterday reported that its net profit gained 33 percent to 1.63 billion yuan ($264 million) in the first quarter from a year ago due to a recovery in demand and prices. The steelmaker on March 8 raised prices for hot-rolled and cold-rolled steel products to their highest since June.

The company’s operating profit surged 90 percent to 2.22 billion yuan in the first quarter from 1.17 billion yuan.

Passenger-vehicle sales in China rose 20 percent to 2.84 million units in January and February from a year ago, the strongest start to the year since 2010, according to the China Association of Automobile Manufacturers. China will also lift railway spending from 631 billion yuan last year, the official Xinhua News Agency reported Jan. 17, as it seeks to expand to 120,000 kilometers (74,580 miles) of track by 2015.

Still, hot-rolled coil prices in China, a benchmark product, have declined 12 percent since Feb. 18 amid concerns over industry overcapacity and lower-than-expected economic growth. Baoshan’s Ma also said that steel demand from the shipbuilding sector will remain weak.

Iron ore with 62 percent content delivered to China climbed to a 16-month high of $158.9 a ton on Feb. 20. It has since declined 15 percent to $134.6 a ton as of yesterday. Iron ore prices are likely to be about $130 a ton this year, Ma said.

Baoshan, which plans to produce 22.56 million tons of steel this year, aims to export 2.3 million tons of the alloy, he said.

Baoshan advanced 0.2 percent to close at 4.80 yuan today, compared with a 1 percent drop in the benchmark Shanghai Composite Index. The stock has fallen 4 percent in the past 12 months.