China's major steelmakers report hefty losses

BEIJING -- China's major large and medium-sized steel enterprises suffered losses totalling 3.18 billion yuan ($503 million) in the first eight months of the year, according to a report carried in Friday's Economic Information.

Citing information from an anonymous source at the China Iron & Steel Association, or CISA, the report said the sales revenues of China's major steel companies fell 6.21 percent from a year earlier to 2.37 trillion yuan during the January-August period.

In August, major steelmakers reported the year's worst performance, with losses amounting to 4.2 billion yuan.

"The situation is worsening. Of the 80 companies polled by CISA, 44 posted losses in August," said the source.

The industry's struggle is also manifest in data from the National Bureau of Statistics, which showed a profit drop of 67.4 percent in the sector during the January-August period, whereas the country's overall industrial profits declined a mere 3.1 percent during the same period.

The losses come amid overcapacity, sluggish demand and rising production costs that have combined to the sap profits of Chinese steelmakers.

Data from WIND, a major service provider, suggest that of the 18 listed companies who predicted their earnings for the third quarter, only three forecast profit growth, with the rest predicting profit declines or even losses.

Weighed down by the downbeat forecasts, a majority of listed steelmakers logged declines on China's stock markets, with 21 such companies slumping more than 10 percent in the third quarter, according to WIND.

Xu Xiangchun, chief information officer at Mysteel, an industry information provider, said the situation might improve in the fourth quarter, as China's infrastructure projects will help fuel demand for steel, which will in turn drive up prices and enhance profitability.

"But market uncertainties still remain," Xu cautioned, citing the risks of blind production resumption and rising iron ore prices as major threats to the industry.