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Panzhihua Steel Profit Falls 92 Per Cent

Posted on: Tuesday, 14 February 2006, 18:00 CST

By Helen Yuan and Xiao Yu

Panzhihua New Steel & Vanadium Co, the world's third-biggest producer of vanadium steel used in high-speed railroads, posted a 92 per cent plunge in fourth-quarter profit because of falling steel prices.

Net income fell to 14.3 million yuan (US$1.78 million) in the three months ended December 31, from 174 million yuan (US$22 million) a year earlier. The figures were derived by subtracting numbers for the first three quarters from full-year numbers reported yesterday by the company. Sales fell 25 per cent to 3.4 billion yuan (US$420 million).

China, the world's biggest steel maker, has had a glut in the industry in the past two years, leading to lower prices. Hot-rolled coil, which is used in everything from buildings to automobiles, fell 19 per cent to 3,120 yuan (US$385) a ton last year, according to the China Iron and Steel Association.

"The company had a tough time with rising raw material costs and falling prices last year," said Zhu Libin, a steel analyst at Shanghai Shenyin Wanguo Research and Consulting Co.

Anshan Iron & Steel Group, Baotou Iron & Steel Group and other producers increased production capacity for steel rail last year, boosting competition for Panzhihua Steel, company spokesman Zhou Jun said on Monday.

Shares of Panzhihua Steel fell 0.7 per cent to 4.11 yuan (51 US cents) on Monday before the company reported results. They traded at 4.08 yuan yesterday.

Full-year net income fell to 811.3 million yuan (US$100 million) from 824.4 million yuan (US$101.78 million), the company said in a statement to the Shenzhen exchange. Sales rose to 15.2 billion yuan (US$1.88 billion) from 13.4 billion yuan (US$1.65 billion).

Still, steel prices are recovering and demand may pick up this year, Shenyin Wanguo's Zhu said.

China has announced plans to expand railway construction to help ease a transport bottleneck, he said. The country plans to spend 1.25 trillion yuan (US$155 billion) on 17,000-kilometres of new railroads by 2010, Xinhua News Agency said on January 6.

The company produced 632,700 tons of steel rail and 2.56 million tons of hot-rolled coil last year, the company said. Panzhihua signed an agreement to ship 6,000 tons of steel rail to the US in April to counter falling demand in China, the company said Monday, without disclosing the buyer or the contract value.

Source: China Daily; North American ed.

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