Hebei Steel First-Half Earnings Gain as Materials Costs Decline

Hebei Iron & Steel Co., China’s largest mill by output, said first-half earnings rose by 7 percent as operating expenses declined with raw-material prices and it took steps to control costs and improve profitability.

Net income increased to 357 million yuan ($56 million) from 333 million yuan a year earlier, the Shijiazhuang-based steel mill said. Sales fell to 42.4 billion yuan from 51 billion yuan.

The average price for steel reinforcement-bar tumbled 24 percent in the first six months from a year ago, as mills face overcapacity and slumping demand in China. Auto sales in the world’s largest car market dropped while investment in new housing starts shrank this year, all reducing steel consumption for the country’s mills that produce half the world’s steel.

Shares of Hebei Steel have fallen 20 percent since trading resumed on Monday, to close at 5.67 yuan on Tuesday, while the broad Shenzhen Composite Index has dropped 14 percent. The stock was suspended ahead of the company’s announcement of a plan to raise as much as 8 billion yuan in a private placement.

Hebei’s six-month earnings bucked a trend among peers, affected by falling steel demand as China’s economy has faltered. Net income at medium-to-large mills slumped 73 percent from a year earlier, according to a China Iron and Steel Association survey of its members.

Smaller rival Maanshan Iron & Steel Co. said its first half saw a net loss extend to 1.24 billion yuan from 730 million yuan a year ago.

China is shipping more steel onto world markets as domestic demand sags, according to Citigroup Inc. Overseas sales expanded 27 percent to 62.13 million metric tons in the first seven months, the highest ever for the period, according to data compiled by Bloomberg.

Hebei province, where the company is located, has also borne the brunt of recent production cuts to ensure clean air during a Sept. 3 parade in Beijing to mark the end of World War II.

— With assistance by Feiwen Rong

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