Angang Steel, one of the mainland's top five steelmakers, expects to return to a profit for the full year as Beijing's stimulus revives demand and its raw materials costs fall from the first half, according to chairman Zhang Xiaogang.
Despite increased prices of its major products - between 150 yuan (HK$170.15) and 300 yuan a tonne yesterday for delivery next month - the Liaoning-based steelmaker holds a cautious attitude about the future.
Mr Zhang, speaking after the company reported a 1.55 billion yuan first-half loss, said it was hard to predict whether higher steel prices could hold through the full year, since the rebound might lead to oversupply and cause 'market turmoil'.
Since mid-April, spot prices of hot-rolled coil in Shanghai have risen about 30 per cent to a high of 4,300 yuan per tonne early this month.
Steel prices have risen more on the mainland recently than in the international market because of high demand. However output, which was low, is rapidly being ramped up, leading to fears of oversupply.
Based on daily production last month, the annualised output for the country would be more than 600 million tonnes. Since global output was expected to be only about one billion tonnes, it was obvious that overcapacity in China would be severe, Mr Zhang said.
His cautious tone came after spot prices of hot-rolled coil in Shanghai slumped about 900 yuan a tonne in the past two weeks, while some small mills started to cut prices.
