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Baosteel anticipates a return to profit

Baosteel anticipates a return to profit

Shanghai: China's Baoshan Iron and Steel Co Ltd, the country's largest steel maker, expects to edge into the black in the first quarter of this year after posting a big fourth quarter loss, Reuters writes, quoting the company president. Profits in Chinese steel makers were slashed by high iron ore costs and slumping steel prices in the second half of last year, causing an overall loss for the industry, which produced more than 500m tonnes of crude steel in 2008.

"The listed company did not suffer a net loss in the first quarter, although the industry confronted a very tough market," Fu Zhongzhe told an online briefing. Boasteel lost 6bn yuan ($878m) in the fourth quarter as demand for for its steel withered amid the global financial crisis.

The president said the company had reduced its iron ore stockpiles to a level of about one-month's consumption, while the company expected to work out the iron ore which they purchased at the term prices for 2008/2009 fiscal year before April.

Baosteel, which represents Chinese steel mills in annual iron ore price talks, has cited the slump in domestic steel prices as justification for more favourable terms from top ore suppliers BHP Billiton, Rio Tinto and Vale.

"The company is still in talks with the miners, and the China Iron and Steel Association had raised requirement for the price cut," Xu Lejiang, Chairman of Baosteel and its state-owned parent company, told the briefing.

Fu confirmed that the association demanded that term iron ore prices should fall to 2007/08 levels.

That would means a 40% cut from the price settled last year, the biggest annual price fall in history and an end to six years of consecutive price gains, which boosted prices nearly five-fold during the period to $91 a tonne.  [31/03/09]