Baoshan Steel Posts First Loss in Four Years on Corex Writedown
Baoshan Iron & Steel Co. (600019), China’s biggest publicly traded steelmaker, posted its first quarterly loss in four years after a 2.65 billion-yuan ($427 million) writedown for its suspended Corex plant.
The company’s net loss was 0.4 billion yuan in the three months ended Dec. 31, compared with a profit of 1.04 billion yuan a year earlier. The result was derived by deducting nine- month figures from full-year earnings released today in a statement. The loss was the first since the fourth quarter of 2008, according to data compiled by Bloomberg.
Baoshan Steel in September halted a plant, including two money-losing Corex technology facilities with a combined annual capacity of 3 million tons on the outskirts of Shanghai. It plans to move part of the assets to a new project in the southern port of Zhanjiang and to set aside provisions for the impairment of fixed assets.
China’s economy rebounded in the fourth quarter, with 7.9 percent growth in gross domestic product, from 7.4 percent in the previous quarter, the worst in three years. The country’s new leadership is focusing on urbanization, helping boost steel demand and prices.
Baoshan closed unchanged at 4.73 yuan today in Shanghai before the earnings announcement. The benchmark Shanghai Composite Index gained less than 0.1 percent.
The company’s full-year profit gained 41.1 percent to 10.4 billion yuan in 2012 after it sold stainless-steel and specialty-steel units to its parent, Baoshan Steel said in the statement. The result compares with 10.3 billion yuan of net income in preliminary figures announced Jan. 9.
Corex technology enables manufacturers to make steel from iron-ore pellets and unprocessed or non-coking coal, which is at least 30 percent cheaper than regular coking coal. Baoshan announced the asset writedown in the Jan. 9 statement.
China’s apparent consumption of steel, which includes production and net imports, may rise 4.6 percent to 708.8 million metric tons in 2013, because of the nation’s spending on railways and higher car sales, according to the mean estimate of six analysts surveyed by Bloomberg News this month. That’s faster than 2012, when demand grew by 2.9 percent to 677.8 million tons.
The strongest start to passenger car sales in China since 2010 is also helping Baoshan Steel, which has half the domestic market for automotive steel. Passenger-vehicle sales rose 20 percent to 2.84 million units in January and February from a year ago, according to the China Association of Automobile Manufacturers.
Baoshan on March 8 raised prices of hot-rolled and cold- rolled steel products to the highest since June.
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