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Steel firms battered by prices and the market

MORE Chinese steel companies are warning of losses or sharp declines in earnings for last year as prices tumble amid slowing demand.

Guangzhou Iron & Steel Co, controlled by Shanghai-based Baosteel Group Corp, said it incurred a loss last year. Gansu Jiu Steel Group Hongxing Iron & Steel Co's net income plunged more than 90 percent in 2008 while Nanjing Iron & Steel Co's net tumbled over 50 percent, according to their preliminary earnings statements filed to the Shanghai Stock Exchange yesterday. Precise figures were not announced.

Domestic steel prices have dived since July as the global recession hurt demand from car makers and construction firms. Mills also saw the value of their iron ore inventories fall as spot ore prices tumbled.

Earlier, Angang Steel Co, one of China's largest steel companies, said it expected its 2008 earnings to fall 55 percent.

Prices appeared to have stabilized and output rebounded after China unveiled a 4-trillion-yuan fiscal stimulus package in November including heavy spending on infrastructure. The domestic composite steel price index compiled by industry specialist Mysteel rose to 140.9 yesterday, up from 127.7 in mid-November, the lowest in almost two years.

And an expected fall in iron ore contract prices would also help mills' earnings this year.

"If the 2009/10 iron ore contract prices could fall 30 to 50 percent, as many market participants expect, this year's earnings for Chinese mills will be better than 2008," Daiwa Securities analyst Helen Lau said.

China's December crude steel output rose to 37.79 million tons from 35.19 million tons in November, the first month-on-month gain in six months. Although the December output was down 10.5 percent on a yearly basis, it bucks the sharp decline in Japan where December output tumbled 28 percent.

Meanwhile, the global crude steel output dipped 1.2 percent last year to 1.33 billion tons, the first annual drop since 1998. December's production plunged 24.3 percent as the downturn in demand gathered pace, according to the World Steel Association.

China produced 2.6 percent more to 502 million tons in 2008, becoming the first nation to produce more than 500 million tons in one year.


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