Baosteel Faces ‘Most Difficult’ Period in 30 Years on Crisis
Baosteel Group Corp., China’s biggest steelmaker, is facing its “most difficult” period since its founding 30 years ago as global economies grapple with a slowdown and credit crisis, an executive said.
Baosteel’s output, sales and profit has plunged, and the company should cut capital expenditure, General Manager He Wenbo said in the Shanghai-based company’s regular newsletter.
Baoshan Iron & Steel Co., the publicly traded unit, said last month it may incur a fourth-quarter loss as tumbling demand from automakers and builders and falling prices force it to write off inventories. Steel prices have dropped 40 percent since a June peak in China.
“We should adjust our production-sales strategy rapidly,” He said. “We also should reduce or adjust the fixed-asset and long-term investment scale of the group.”
Baoshan fell as much as 2.9 percent to 4.98 yuan in Shanghai, and traded at 5.08 yuan by the 11:30 a.m. break. The benchmark CSI 300 Index fell 1 percent.
Baosteel, the world’s fifth biggest mill by capacity, was formed in 1978 when Deng Xiaoping decided to build a steel plant on the coastal city of Shanghai to compete with Japan’s Nippon Steel Corp. It started production in 1985.
The company is building a 60 billion yuan ($8.8 billion) steel plant in Zhanjiang, Guangdong province, to increase its capacity by one third.
Unit Baoshan yesterday cut hot-rolled product prices by 18 percent to 3,242 yuan a metric ton for January delivery, following a 22 percent cut in cold-rolled prices last week for December delivery. The unit will keep the cold-rolled prices unchanged in January.
Tags: Baoshan, Baosteel, steel-maker