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May 23, 2017

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Chinese steel firms post US$1.6b profit

CHINA’S listed steel companies reaped over 11 billion yuan (US$1.6 billion) of net profits in the first quarter to post the best performance in nine years, as prices surged amid a supply cut while speculation added coal to the fire.

Only three of the 33 listed steelmakers posted losses.

Baoshan Iron and Steel Co, the listed company of Baowu Iron and Steel Group, led with a quarterly net profit of 5.05 billion yuan, a surge of 118.2 percent from a year earlier, followed by Angang Steel’s 1.07 billion yuan and Maanshan Iron and Steel Co’s 902 million yuan.

Domestic steel prices rebounded during the January-March period, with the most traded rebar contract for October delivery rising 10.6 percent to 3,152 yuan per ton.

The prices surged continuously over the first two months of the year “as the supply-side reform resulted in a capacity decline while traders expected higher demand till April,” said Wang Guoqing, research director at Lange Steel Information Center, a domestic steel industry consultancy.

Speculators also gave a boost to prices as they hoarded steel on hopes that prices would keep rising till April or May, Wang said.

But Xu Liying, a Lange analyst, predicted that steel plants would swallow a bitter pill in the future as steel prices peaked in mid-March, since when the market has turned sluggish as demand fell in the automobile and property sectors,

“I am afraid we will see profit decline for the second quarter,” Wang said.

“The prosperity in the first three months could be a zenith for the first half of this year.”

Also in the first quarter, China cut 119-million-ton production capacity of low-quality steel made from scrap metal, according to the China Iron and Steel Industry Association.


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