Baosteel forecasts Q1 profits despite slow start
Shanghai. April 6. INTERFAX-CHINA - Baoshan Iron Steel Co. Ltd. (Baosteel), the listed arm of China's leading steelmaker Baosteel Group, expects to be in the black in the first quarter (Q1) and maintains an optimistic outlook for the industry in the second half (H2), the general manager Ma Guoqiang said April 5.
The firm sees steel demand recovering in H2 with liquidity improving as Beijing moves to ease tight monetary policy, Ma said in an online results briefing. The company is likely to issue its Q1 earnings report at the end of this month.
Recent manufacturing data also points to a nascent recovery in the industry taking off in March after a poor performance in the first two months of the year, during which time China's major steelmakers chalked up combined losses of RMB 2.8 billion ($444.92 million), according to data from the China Iron and Steel Association (CISA).
The country's official Purchasing Managers' Index (PMI) for the iron and steel industry jumped 6.5 points to 49.3 last month - close to the 50-point dividing line between contraction and growth - show data released by the China Federation of Logistics and Purchasing (CFLP) and National Bureau of Statistics (NBS) April 2.
The index of new purchasing orders for the industry also climbed to 52.7 in March, up from 45.2 in February, and the CFLP and NBS predict steel prices will keep rising in April.
Increased consumption of steel product inventories also point to a recovery, with the stockpile index falling to 46.5 from 54.1 in February. The declines in reserves picked up pace for six consecutive weeks up to March 30, with stockpiles in 26 major production areas reaching 18.17 million tons.
The CFLP and NBS started issuing detailed PMI data for the iron and steel industry in January. At 49.3, the industry-specific index still lagged behind China's overall PMI reading, which rose to 53.1 from 51.0 in February. HSBC's flash PMI for China, which puts more weight on smaller private enterprises, was down 0.6 points at 48.3 in March, however.
Uncertainties over the sustainability of the recovery remain. The fragmented structure of the industry is hampering efforts to reduce output and the difficulties will continue as long as weak fundamentals persist in the iron ore market, said Ma.
The CFLP also warned of over-production, noting that the industry's capacity utilization rate is currently around 82 percent and will keep rising if prices keep climbing. Daily crude steel output in mid-March was 1.62 million tons, up 3.2 percent from the first ten days of the month, show CISA data.
- KHM