Top China Steelmakers Point to Profit Surge on Higher Prices

  • Hesteel third-quarter net income to rise as much as fourfold
  • Rebar futures had best quarter in six on Shanghai exchange

Two of China’s biggest steel mills said their net income jumped in the third quarter, in a further sign that this year’s price rebound has eased troubles for the world’s biggest producer.

HeSteel Co., the listed unit of China’s top steelmaker, expects to post net income at the highest level since 2010 on gains in prices, according to a statement. Net income will be between 453.7 million yuan ($67 million) and 606 million yuan, from 150.5 million yuan a year earlier. Angang Steel Co., listed unit of the fourth-biggest mill, expects profit of about 677 million yuan, swinging from a loss of 1.03 billion yuan a year earlier.

“Steel prices in the past three months have been quite good,” Angus Chan, analyst at Bocom International Holdings Co. Ltd. , said by phone from Hong Kong. Profits at China’s steelmakers could come under pressure in the fourth quarter from higher costs, he said.

Demand Recovery

Steelmakers in the nation that accounts for about half of world output have enjoyed a better year after stronger demand boosted prices and expanded profit margins. Benchmark steel rebar on the Shanghai Futures Exchange averaged the highest of any quarter since the first three months of 2015 in July-September. Global steel use will rise 0.5 percent this year, the World Steel Association said this week, reversing an April forecast for an 0.8 percent drop after China’s market rebounded.

Hesteel’s shares were unchanged at 3.08 yuan in Shanghai by 11:30 a.m. local time, while Angang was also unchanged at 4.47 yuan.

Steel prices have rebounded since China returned from a week-long public holiday at the start of October. Stronger domestic demand is diverting steel away from export markets and fueling higher iron ore imports, Daniel Hynes, senior commodities strategist at Australia & New Zealand Banking Group Ltd., said in an e-mailed note.

Hesteel said its nine-month net income will be between 862.7 million yuan and 1.01 billion yuan, up from 507.5 million yuan a year earlier. Angang expects net income to about 977 million yuan for the nine months, from a net loss of 888 billion yuan a year earlier. Angang and Hesteel are due to report final third-quarter earnings on Oct. 26, after Baoshan Iron & Steel Co., the No. 2 producer, on Oct. 24.

Steel producer margins will continue to be bolstered as leaders in China take steps to shore up economic growth, HSBC Holdings Plc said in a report received on Friday. The surge in coking coal, a raw material, will probably keep global steel prices elevated,  it said.

— With assistance by Martin Ritchie

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