China Steel sector may slightly improve this quarter: Baosteel

BEIJING (Scrap Monster): China's steel sector will see a slight improvement in performance from this quarter, supported by restocking demand, said an executive at Baoshan Iron & Steel.

Ma Guoqiang, general manager at the Chinese firm, said destocking by companies, which had weighed on steel mills' earnings this year, is nearing an end, and that government measures to boost the economy should also help the overall sector in the current quarter and next.

"The impact of restocking demand and a series of monetary policies have started to kick in, and the economy will be stabilising," Ma told an online briefing after announcing third-quarter results the day before.

Baosteel, the country's biggest listed steelmaker, posted a 5% fall in net profit to 1.18 billion yuan ($189 million), exceeding an average forecast of 876 million by four analysts polled by Reuters.

Ma expected the performance for the whole sector to improve compared with the third quarter, even though the margins will be curbed by rebounding prices of raw materials including iron ore and coal.

"Judging from current global and domestic economic growth, it is realistic to expect the 'cold winter season' to last for 3-5 years, and the steel sector will not be an exception," he said.

An economic slowdown in China, the world's top steel producer, has hit demand for steel, sending prices tumbling 26% to three-year lows in early September from the 2012 high in mid-April. Iron ore prices slid 40% in the same period.

Ma blamed overcapacity as the main reason for the tough situation facing the country's fragmented steel sector.

Chinese steelmakers suffered an 81% decline in profit to 19.3 billion yuan for the first eight months of this year, the country's economic planner said in a statement.