Baoshan Iron & Steel, Angang Steel and rival Chinese mills will likely report slumps in first-half earnings from this week. But Credit Suisse Group AG and JPMorgan Chase & Co said things will get better in the very near future.
Credit Suisse said Baoshan, China’s largest mill, may record a 98% profit slide for the first six months but earnings will rebound to $1 billion in the second half from a loss a year ago. JPMorgan said infrastructural projects and "explosive" steel demand will end a year of earnings decline.
Steel output reached a record and prices have soared 29% since the government announced an RMB4 trillion ($586 billion) stimulus package in November to revive the economy. Record passenger car sales and a surge in construction have spurred demand, while costs of raw materials have dropped.
Bloomberg reported that Baoshan Steel and the larger mills may post bigger profit gains than their smaller rivals in the second half because flat product prices, which have lagged behind long products, may catch up.
For those of us not in the steel business, flat products, such as cold-rolled coils, are used in cars, appliances, ships and pipes. Long products are used in construction.
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