Net profits of iron, steel companies drop in Q3

Updated: 2012-10-16 17:02

By Ye Yiwen (chinadaily.com.cn)

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A total of 83 percent of all iron and steel companies that have released their estimated third-quarter results reported drops in their net profits, China Business News reported Tuesday.

Angang Steel Company Ltd, China's leading iron and steel company, expected an accumulated net loss of 3.17 billion yuan ($506 million) for the first three quarters. In the same period last year, the company had a net profit of 239 million yuan.

A business insider said that though the prices of iron ore and other raw materials are dropping, the previous high price still has a lingering negative effect on companies because of the procurement cycle, especially for large and medium-sized companies. The high cost of raw materials is one of the major elements that contributed to the loss.

Angang lost 1.98 billion yuan in the first half of this year and continued to lose about 1.2 billion yuan in the third quarter. The net loss widened even faster in the third quarter.

The iron and steel market this year remains gloomy. As of the end of August, the major varieties of iron and steel products declined by more than 20 percent by accumulation.

According to statistics from the 80 large and medium-sized iron and steel companies under the monitoring of China Iron and Steel Association, the overall loss in July totaled 1.98 billion yuan and amounted to 4.20 billion yuan in August. More than half of the 80 companies are losing money.

Steel prices continued to fall, making it very difficult for companies to earn profits from their operations and the production of iron and steel. At present, many iron and steel companies are cutting down on their production.

Meanwhile, shares prices in the domestic iron and steel market are gradually rising because of the release of the third round of quantitative easing in the US, the European Central Bank's unlimited debt purchase and Chinese government's support for new construction projects.